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Operator: Good evening. Thank you for attending today's Super Hi International 2025 Q4 and Full Year Earnings Conference. The company leaders are present to the conference are Ms. Yang Lijuan Executive Director and CEO; and Ms. Qu Cong, CFO and the Secretary of the Board. The content of today's meeting may contain forward-looking statements, including, but not limited to, the company's statements on its strategies and business plans as well as the outlook for its performance. The content released by this conference at the earnings conference as well as the comments and responses to your questions only represent the views of the management as of today. Please refer to the latest safe harbor statement in earnings press release, which applies to all the conference calls. The meeting is conducted in Chinese with an external institution providing simultaneous English translation. In case of any discrepancies, the Chinese content shall prevent. The meeting presentation materials have been uploaded to the company's Investor Relations page for your reference. Now we remind Ms. Yang Lijuan, Executive Director and CEO of Super Hi International to review the company's performance in fourth quarter 2025. Lijuan Yang: Thank you. Host. Dear investors and analysts, good evening. I am Yang Lijuan, Executive Director and CEO of Super Hi International. I'm here to brief you on the company's performance in the fourth quarter and the full year of 2025. In 2025, under the strategy of focusing on both employees and customers, the company took the initiative to offer benefits to these core groups. We have witnessed a sustained growth in revenue and customer traffic with the quality of growth improving in the fourth quarter of 2025, that the company's overall operation continued the recovery trend of the first 3 quarters, the customer traffic of Haidilao restaurant reached 8.31 million persons times in this quarter, driving the overall average table turnover rate of Haidilao restaurant to 4x per day, an increase of 0.1x per day year-on-year. At the same time, the company's delivery business and other businesses continue to contribute to revenue in this quarter. Company's total revenue reached the U.S. dollar 230 million, an increase of 10.2% compared with USD 208.8 million in the same period last year. And month-on-month increase of about 7.5% from the third quarter, indicating that our investment in optimizing product cost performance ratio and reaching consumption scenarios and improving service experience that have gradually been recognized by customers. Looking back to the full year of 2025, for Haidilao restaurants operated by the company received a total of 32 million diners. The overall average table turnover rate of the restaurants reached 3.9 turns per day, and the same-store average table turnover rate reached 4 turns per day both an increase of 0.01 turn per day compared with the same period last year. Total revenue in 2025 was USD 841 million, an increase of 8% year-on-year. Now I shared with you some of our continuous efforts in business improvement. First, adhere to offering benefits to customers and employees and consolidated the foundation of store management in 2025 on the basis of focusing on both employees and the customers. We further clarified and implemented the proactive strategy of offering benefits to customers and employees throughout the year. In terms of the employee development, we have continuously optimized from multiple dimensions, such as salary and welfare, daily care and training and development, enhancing the sense of belonging of the diversified team. Up to now, we have about 90 reserve backbones and nearly half of whom are foreign key staff laying a talented foundation for diversifying management. In the frontline management, on the basis of a formulating corporate line principles, we have turned the focus of work to frontline stores in the regional divisions, allowing them to focus more on the market customers and employees themselves. This transformation has released very obviously, frontline vitality in the second half of the year in many excellent service cases and the management practices have been spontaneously created by regional divisions in stores. At the same time, we also encourage management, the team in various regions to conduct cross-departmental and cross-city store inspections that conducts a comparison learning and reflection in on-site work, in conjunction with the dual store management and multi-store management policies, we extend excellent management capabilities to more stores and to further expand the talent training action. Second, to create a unique Haidilao and continue to invest in customer experience this year in our work of focusing on customers that we have formulated the differentiated service plans for different scenarios such as birthdays, parent-child activities, the diners and late-night snacks and implemented the scenario-based services in [ holdings ] such as dishes, peripheral products and decorations with a more substantial investment. In terms of our products, we have continued to promote localized new product launches in various countries with a total of more than 1,000 optimized new launches throughout the year. This year, we focused on the implementation of fresh-cut food scenario. Fresh-cut meat is quite novel for overseas consumers. We have simultaneously equipped with the declaration of open kitchen, fresh-cut workshop, which can bring a better consumption upgrade experience. At present there are a total of 57 SKUs over fresh-cut beef and pork series covering 13 countries. As of December 31, the average click-through rate of the fresh-cut meat series products in overseas countries reached 12.21%. This year, we have continued to innovate in the takeout scenario, launching faster food categories such as spicy boiled food cups, fried snacks and wraps and noodles. At the same time, we launched and promoted on multiple platforms and expanded delivery coverage at the annual takeout revenue increased 68.1% year-on-year, effectively reaching customer groups beyond the dine-in meals, in terms of space and service, we selected some pilot stores to carry out the transformation of nightclub scenarios, upgrading lighting, sound effects and the interactive experience. The improvement of table turnover rate during late night snack hours in pilot stores is more obvious than not similar stores around us. In addition, we have actively explored the innovative marketing models in many countries and driven a certain degree of talk-of-town popularity and customer traffic support of the through the dual track strategies of celebrity co-branding and IP authorization. In terms of cost performance ratio, we have authorized the teams in various countries to make a reasonable adjustment in pricing, portion size and plating allowing customers to better feel the cost performance ratio. This is also one of the important reasons why our table turnover rate remained stable in the traditional off season in the first half of the year. Thirdly, enhance the capability of the headquarters and promoted the upgrading of organizational efficiency and digitalization. We have made several important progress in the capacity building of the headquarter this year. In terms of supply chain, we have continuously increased the production capacity of our own central kitchens strengthened the hierarchical management and the bargaining power of global suppliers. The continuous efficiency improvement of the supply chain since this year has offset the gross profit pressure brought by the customer benefit strategy to a certain extent, proportion of the employee cost that has also gradually approached this level of the same period last year. In terms of digitalization and organizational efficiency we have actively explored the application of AI technology in management to improve the operational efficiency of the headquarters and stores. We have also further integrated the coordination mechanisms of products and marketing guided menu optimization and the data evaluation informed in normalized product management cycle of new launch evaluation and iteration. Up to now, the scale of our overseas members has continued to expand and the application of digital tools in the members activation and scenarios reach has gradually deepened. As of the end of 2025 with the number of overseas and members of Haidilao has exceeded 8.5 million. Fourthly, the expansion of store network and the wood picker plant are promoted in parallel. In terms of expansion, we still adhere to the bottom-off strategy where country managers are responsible for site selection and implementation. The headquarters control the quality and pace. In 2025, we opened a total of 13 Haidilao stores throughout the year, covering 9 countries, including Malaysia, South Korea, Indonesia, Japan, United States, Australia, Canada, UAE and the Philippines. In the meantime, we continue to optimize the store network layout in hand and make adjustments at the right time. In 2025, we closed a total of 9 stores in Singapore, Thailand, Malaysia and Japan, some due to lease expiration, others due to active adjustments among the 3 locations that have completed the format transformation from Haidilao to the second brand and been incorporated into the Pomegranate Plan for unified operation. As of the end of 2025, we operated a total of 126 Haidilao stores overseas. In terms of store opening quality, the number of stores we have signed contracts for and should be opened it still remains in double digits with a steady overall expansion pace, we have not relaxed that -- the requirements of our profitability and implementation of a quality of new stores, 50 in terms of Pomegranate Plan, we have implemented at a steady pace of advancing gradually and verifying was a polishing the plan. As we go along this year, we continue to incubate prototype stores in the second brand, projects in different countries around multiple catering trucks, such as the hotpot, BBQ, smart spicy cups and in terms of the implantation mechanism, we adhere to bottom-up approach in the terms. The teams in various countries identify trust and promote the site selections and implantation based on the local market whilst the headquarters focuses on the construction of the middle office capabilities, such as product R&D, brand marketing, informization and business analysis forming front-end and back-end coordination. We can also show you some of the results this year. In terms of progress, we have some specific achievements that we will report to you this year, projects such as [ spa power barbecue and HiboMalatanian ] the Japanese Izakaya are progressing as an the some of which have achieved a single store probability proving that our exploration of new formats overseas is feasible. In addition, 3 original Haidilao locations were transformed into second brand operations throughout 2025, and the Pomegranate Plan has begun to link with the optimization of the existing store network rather than being an isolated new thing from the perspective of operating data, the revenue contribution of related business has also continued to increase. Other business revenue increased by 61.4% year-on-year and the substansive contributions have begun to be seen in reaching the revenue structure and expanding the customer base. And next, we'll still adhere to a prudent pace of advancement to continue to polish the proven project, buildup information, digitalization and the mid-of the support capabilities and on this basis, gradually improve replication efficiencies and enrich the company's format layout and growth sources. Looking forward into the future, we take becoming a leading global comprehensive catering group as our long-term development goal and continue to improve in 5 aspects, the customer experience, the restaurant network, operational improvement in new business and headquarter capabilities. The above is my introduction to the business development in situation. So now please welcome Ms. Qu Cong to introduce the financial situation to you all. Cong Qu: Thank you. Ms. Lijuan and next, I will report to you on the financials of the company. Our total revenue for the full year 2025 was USD 840.8 million, an increase of 8% compared with the same period last year. Operating revenue of Haidilao restaurants was USD 790 million, accounting for about 94% of the company's total revenue, an increase of 5.7% compared with last year, take out revenue USD 19 million, increase of 68.1% year-on-year. Other business revenue was USD 31.8 million, increase of 61.4% year-on-year mainly due to the continued expansion of the revenue contribution from restaurants incubated under the Pomegranate Plan and the continuous penetration of peripheral products such as hot pot condiments among local consumers and in retail channels. Full year table turnover rate of Haidilao restaurant was 3.9 turns per day and the same-store turnover rate was 4 turns per day, both an increase of 0.1 turn compared with 2021 in achieving steady improvement in operating quantities against the background of a continuous expansion of the store network -- from the perspective of the annual rhythm, the year-on-year revenue growth rate of each quarter was 5.4%, 8.5% to 7.8% and 10.2%, respectively, with the growth momentum and strengthening quarter-by-quarter and reaching the annual highs in the fourth quarter, reflecting that our continued investment in optimizing product cost performance ratio reaching consumption scenarios and improving service experience. In terms of the raw material costs accounted for 33.6% revenue increase of 0.5% over last year due to our active optimization restaurant dish quality and increase in the proportion of fresh products, which brought certain fluctuations in raw material cost in the short term, employee costs accounted for 33.9%, an increase of 0.6 percentage over last year in 2025. We systematically reached the salary and welfare for the frontline employees and increased the investment in employees daily care. Rental accounted for 2.9% of revenue increase of 0.3 percentage points compared with the same period last year. Quarter and electricity expenses of 3.4% for revenue, a decrease of 0.2 percentage points compared with last year. Depreciation and amortization accounted for 9.8% of the revenue decrease of 0.6 percentage points compared with last year. Above changes are mainly due to dilution of a promotion proportion of relevant expenses by the increase in revenue, other operation-related expenses accounted for 11.3% of revenue increase of 1.4 percentage points over last year, mainly due to the increase in our outsourcing services piece for restaurants as well as the company's increased investments in continuous promotion of the Pomegranate Plan and the brand building regional expansion in 2025. Our full year operating profit was USD 37.4 million, operating profit margin, 4.4% decrease compared with 2024, from a perspective of quarterly trends against the background we actively increased the investment in the first half of the year. Operating profit margin had a low of 1.9% in the second quarter recovered significantly from the third quarter and rebounded from 5.9% to 5.7% in the third and fourth quarters, respectively, with a clear recovery trend in the second half of this year. This resulted in line with our forecast at the beginning of the year, and this has laid a solid foundation for the company's long-term healthy development under the comprehensive influence of above factors after tax net profit to 2025 was USD 36.3 million in any substantial increases compared with 2024, significant improvement in net profit and is mainly due to the favorable impact of 2025, the global exchange trend on the company's multicurrency asset and liabilities. So now looking at Q4, achieved a total revenue of USD 230 million, an increase of 10.2% compared to the same period last year, month-on-month to 7.5% from third quarter, mainly due to expansion of the store network compared with last year, continuous improvement of table turnover rate the peak season, in fact, driving double growth of customer traffic and average customer spending among the operating revenue of a Haidilao restaurant with USD 211.9 million accounting for 92.1% of company's total revenue increase of 6% compared with the same period last year. Takeout revenue was USD 6.8 million substantial increase of 94.3% compared with the same period last year continued high-speed growth and other business revenue was USD 11.3 million, increase of $109.3 million compared with same year last year. We can continue to see the success of Pomegranate Plan with further evidence in our fourth quarter. Fourth quarter of 2025 raw material cost is USD 76 million. The gross margin, 66.6%, a decrease about 1 percentage point compared with same period of last year, mainly due to the short-term cost increase brought by optimization of further materials employee cost was USD 74 million, accounting for 32.2% of revenue, basically same as same period last year, improvement compared with the third quarter mainly benefiting from the increase in revenue scale in fourth quarter rental expenses is USD 6 million, accounting for 2.8% of the revenue basically same as the same period of last year. Quarterly, electricity expenses at USD 7 million, accounting for 3.1% of revenue, a decrease of 0.3 percentage points compared with the same period last year. Depreciation and amortization was USD 21.5 million, accounting for 9.4% of the revenue, a decrease of about 0.9 percentage points compared with the same period last year. Total revenue and other operating expenses of USD 29 million, accounting for 11.7% of revenue increased about 1.1 percentage points and mainly due to the promotion of Pomegranate Plan, brand building and the store expansion. Q4 company's operating profit was h-h. $12.98 million operating profit margin, 5.7%, decreased about 2.7 percentage points and basically, the same as third quarter, the decline in the profit margin is mainly due to active investment on the cost side, which is in line with our overall rhythm of continuously offering benefits to customers and the employees and net exchange losses in the fourth quarter was USD 3.8 million, mainly due to the revaluation impact of exchange rate fluctuation. Under this impact, in Q4, our after-tax net profit was USD 4.47 million achieving profitability by end of 2025 on and our capital reserve is USD 270 million compared with USD 250 million at the end of 2024, mainly due to the net cash inflow generated from annual operating activities. In terms of performance of the restaurants in Q4, we have served a total of 8.31 million customers, an increase of 3.89% compared with the same period in 2024. Company's average table turnover rate was 4 turns per day, increase of 0.1 turn compared with the same period of last year. Our average customer spending was USD 25.4 increase of U.S. dollar at 0.4% compared with the same period last year, mainly because we continue to optimize the this structure and marketing measures to providing consumers with a more differentiated choices. Average daily revenue per restaurant was $18,800, slight increase from the same period last year. And we can see that if the Asia performance is the most outstanding. It has increased about 0.3 turns compared to the same period of last year, reaching 5.1 turns and hence this is mainly thanks to the operating efficiency in Japan and South Korean markets as well as the incremental contribution of the newly opened stores, the average customer spending remaining at USD 28. North America, roughly the same as last year at 4.1 turns per day. In terms of average daily revenue per restaurant is USD 24,100 in the same period, roughly the same as -- same period of last year, and the average customer spending in North American market was the USD 41.4. It rebounded from USD 41 in the same period net increase of 2 Haidilao restaurants in North America in this quarter supported revenue growth. Other regions, the table turnover rate in the fourth quarter were 3.9% affected by ramping up period of newly opened restaurants during the same period. Average daily revenue per restaurant is a USD 24,300 slight adjustment from USD 26,100. Average customer spending for the USD in Southeast Asia total of 5.3 million customers and in terms of the average customer spending USD 19.3 slightly the same as last year maintaining stable operation overall. In the fourth quarter, same period revenue was $195.4 million, an increase of 2.3% for the same-store growth, achieving positive growth for Southeast Asia, we can see 12.8% year-on-year growth and for other regions, they are at 1%, 0.2%, 0.5% year-on-year. For North America, Southeast Asia and for regional same-store performance is pretty much consistent with the overall trend, and I'm not going to go into further details. So this concludes our presentation. We now go into the Q&A session. Operator: [Operator Instructions] The first question comes from [ Jong Yezhang ] from [ Yezhang ] Securities. Unknown Analyst: Ms. Yang and Ms. Qu, This is [ Jong Yezhang ] from [ Yezhang ] Security. I have two questions. The first one is on store opening. May I please ask for the next 3 years and what your store opening plan and looking at the different regions, what the approximate quantity given that there are certain global geopolitical changes and will this affect your current store opening plans? My second question is on the brand equity? And what indicators do you use to judge the strength of your brand in terms of Haidilao branding in various countries? And what is the strength and for the countries that you're not doing so well? And how would you further strengthen your brand equity in those countries. Cong Qu: Thank you. Mr. [ Yezhang ]. I will answer your first question in terms of store opening. For store opening, we continue to focus on bottom to up and we're not going to have a specific target. And in terms of our selection of the stores and in terms of the business district maturity preparation for the local team, those are more important. The present most of these plants, they will be opened up in 2026. In terms of regions, the East Asia is where we have the most confidence, we can see that single store model in Japan and South Korea have been very fine. We have also noticed that North America achieved a net increase in the fourth quarter. And for Southeast Asia, we have a large base. Hence, the focus is on optimizing the existing stock and improving quality of single stores, Middle East, Europe, Australia, and we'll be following and watching the market closely. You also talked about the geopolitical frictions and the work going on at the moment. So for our Middle East deployment, of course, for the short term, that will come as a headwind. But in terms of geopolitics and our approach is that. So we will not be making unified decisions on contractions or accelerations, but it is really country managers to make their judgments call because they are the ones who know the best about the local situation. And again, it is still bottom to upper hand, so we will maintain very prudent. In terms of your second question, how do we evaluate our brand power? and I'll have Ms. Yang to answer this question. Lijuan Yang: So you can see that these would be reflected in our internal indicators, and we mainly look at the following areas, for instance, and number one is the quality of natural growth of the members, the customer registered. Voluntarily and repurchase without relying on promotions or discounts. And second, steady growth of table turnover rate in peak season again, which reflects our customers' willingness to visit certainly continues to increase in the proportion of local customers. If the market mainly relies on the Chinese customers and then the brand barrier is fragile. Number four is the spread of word of mouth that we continue to follow the natural discussion volume and the emotional tendency in a local social media in each market by market. By markets, in the mature markets such as South Korea and Southeast Asia, the brand awareness is high and the local customer base is solid. Japan is growing rapidly with a remarkable progress in the past year. In addition, in some markets where we have entered a short-term -- short time and the brand awareness is still in the early stage, and Asian customers are still the main support. For markets with a relatively weaker brand power, our strategy has several levels. So first, the localized products and the services to make local consumers to feel that a Haidilao dishes are made for them. Secondly scenario-based marketing strategies such as Star co-branding and IP authorization have a higher leverage effect in the market with a weak brand awareness; and number three, be patient, we will not easily abandon a market because of a poor short-term data, but we will carefully evaluate which stores need adjustments based on performance. Thank You. Operator: So the next question comes from CITIC Securities [ Wei Jaba ]. Please go ahead. Unknown Analyst: Thank you. I have two questions for the management team. And the number one is with respect to the Pomegranate Plan. Ms. Yang has mentioned this in detail. Could you please share with us about some of the single store models and the profit levels of the representative of brands in this area? And what are the subsequent development plan? And my second question is about 2026 to 2027. How do you look at this in terms of customer experience and the employee benefits? How do you look at this? And how will this be reflected in operating indicators such as the expense ratio? Cong Qu: Okay. Thank you, Mr. [ Wei ] for your question. The first question, will ask Ms. Yang to answer your question. Lijuan Yang: Thank you, Mr. [ Wei ]. The Pomegranate Plan has achieved some specific results this year. Sparkora BBQ and the Canada Hi Bowl Spicy Hot Pot and the Japanese Izakaya are all progressing as planned and some of them have already achieved a single store profitability. This is a very important signal for us, proving that it is feasible to build a second brand overseas. For single store models, there are great differences among different brands in the markets. At moment, it's difficult to give a unified figure because we're now basically are literally crossing the river by touching the stones and it is not yet the time for large-scale replication and we consider there are mainly 3 factors, whether brand is worth promoting first whether a single store can make a profit without headquarter subsidies. Second, whether the model can be replicated to opened a second store in the same market. And thirdly whether the local team has the ability to operate independently. Only when all 3 conditions are met, will we consider accelerating the expansion. The other business revenues increased by 61.4% year-on-year in 2025, with the substantive contributions starting to emerge behind this growth in this follow-up, we will adhere to a prudent pace of first polish in the successful projects and build the middle platform to support capacity and gradually improve the replication efficiency. At this stage, we still focus on independent research and in incubation and selection, no clear acquisition plans at the moment. Operator: And let's wait for the next question. Cong Qu: I'll take your second question. 2025, this is a year of our active investment concentrated in the first half of the year, operating profit margin hit a bottom of 1.9% in the second quarter, but rebounded to 5.9% and 5.7% in third and fourth quarters of the second half of the year, showing a clear recovery trend. Entering into 2026, our investment strategy has shifted from increasing to optimizing the established the employee benefits of standards and customer service quality will not be reduced, and we'll continue to pay attention to any unreasonable aspects in dish and pricing. However, the strategy running in period has passed, the corporate correction has been briefly improved. The investment direction will be more precise and the more attention will be paid to the input/output ratio reflected in the expense ratio, the ratio of the employee cost of revenues is expected to gradually spin out with the revenue growth, the continuous efficiency improvement of supply chain will support the proportion of the raw materials, the fee of food delivery platforms will rise with the business growth. But the investment in brand building and the consulting will be more focused. Overall speaking, the expense ratio structure in 2024 will be optimized to a certain extent compared with the 2025, but we will not set a specific profit margin target and then reverse deduced business behavior. We will not shrink investment in customers and employees for the sake of short-term good profit margins, but they will be more precise. Thank you. Operator: And we now go into the next question, is Mr. Lai Shengwei coming from CICC. Shengwei Lai: Can I please ask about the raw material cost, and we can see that the price of the beef in [indiscernible] has recent shop team recently, and there are external environmental disturbances and how do you look at the future gross profit margin trends? How would the company hedge against the pressure of rising raw material costs? My second question is about the different store level operating profit and margin across different regions, which regions may perform relatively poorly in 2026 further? And improvement measures that the management might take? Lijuan Yang: Thank you, Mr. Lai for your questions. So first question on raw material, this is our key focus. 2025 raw material accounted for 33.6% of our revenue for the whole year, an increase of 0.5 percentage points compared with 2024, mainly due to the increase in food material costs driven by business expansion. For instance, we have introduced fresh fruit cutting. Our response measures are mainly in threefold: first centralized procurement and hierarchical supplier management to continue to strengthen the bargaining power with the global suppliers. And none of the scale effect has already been partially reflected in 2025. Secondly, continuously to improve the production capacity of our central kitchens, reduce the dependence on external processing. Number three, menu structure optimization, we have established an evaluation system of click rate, coverage rate, gross profit margin and continuously iterate the items with no gross profit contribution to avoid inefficient SKUs occupying procurement resources. Overall, we expect the ratio of raw materials to revenue will remain basically stable in 2026. Your second question, in terms of store level profit margin by region separately. We do not disclose those, but we can give you some directional judgments. East Asia is the region with the healthiest single store model at present with a table turnover rate of 5.1x in Q4, average revenue of USD 20,800 per single store. Profit contribution at the restaurant level has improved significantly. North America remains above USD 24,000 with a high absolute value, but the rent and labor costs are correspondingly be higher. Southeast Asia has a large base of stores with a great individual differences. Some mature stores performed very well and a few individual stores are still in the adjustment stage. If we look at the future improvement potential, the table turnover rate of some stores in Southeast Asia has not reached the expected level in 2026. So we'll focus on promoting the operational improvement of these stores, including deepening of product localization and upgrading of the services scenarios. The newly opened stores in North America need time to ramp up their performance and we have expectations and patience for this. The improvement direction over each region in 2026 is a clear and will not change our long-term judgment call on any of the regions due to short-term fluctuation. Operator: Next question. We have Ms. [indiscernible] from [indiscernible] securities. Unknown Analyst: Thank you for this opportunity. I have three questions. here to ask the management team. The first one is short term, we can see that right now -- Japanese relations are being affected. And so I don't know whether this would affect your table turnover rate performance. And second, about average customer spending -- we can see that 2025 average [indiscernible] trending downwards has helped with the increase in the customer traffic in 2026, what about your pricing? Would you continue to reduce your price. In terms of the mid and long term, how do you balance this short-term profit concessions? And as well as profit margin balance, how do you strike a balance between those two? And my next question is on the stores because in 2025, you have closed certain stores, underperforming stores. Right now, what is the proportion of the current store network that are still in loss or have a low operating profit margin? Going forward, how would the company evaluate those companies when you consider whether those should be close or -- what are the key indicators? Lijuan Yang: Thank you, Ms. [ Li ] for your questions. So your first question, the performance of the Japanese region in terms of what we can see right now, our operation has not been affected and our turnover -- table turnover rate is maintaining stable in terms of proportions of local customers that continue to rise, the consumption scenarios are also relatively rich, impact over short-term certain fluctuations on the overall operation is limited. This is the result of our persistent localization operation and in-depth cultivation of local customers. We have not yet been impacted, but we will continue to follow up on the external environment closely. In terms of the adjustment or reduction in average customer spending in 2025. And this is not simply about a price reduction. This is about making customers feel better in terms of cost performance, such as pricing rationality, portion science, plating and the service experience. So some of those are our active adjustments and some of these are superimposed with the structural changes on the other hand, such as the number of stores in different countries, the increase in local customers, the changes in average number of people per table and so on. Our direction in 2026 will remain to ensure Haidilao's position as the mid- to high-end restaurants whilst subordinating to the improvement of customer perceived value, healthier and fresher tissues, better new product launch experience and more dimensional consumption choices in the mid- and long-term profit concession and profit margins are not an opposing relationships. The customer flow growth and the customer stickiness brought by profit concessions are the foundation for the long-term improvement of profit margin for every 0.1% increase in the table turnover rate and the positive impact on the store level profit margin is quite considerable and the profit concessions and the profitability for a positive cycle with a time lag. In 2025, and we have closed down 9 shops and 3 of those have actually changed to a second brand. And for us, it's not giving up on those companies. And out of these 126 companies that we are running overall speaking, and overall quality is improving. We're not really able to disclose to you about the specific number of the ones that are not doing so well, were underperforming stores, but I can give you some guidance and when we look at a store whether any adjustments need to be made, mainly three aspects. Number one is to see the operating -- number one is to see whether there is any visible improvement in the pathways. Second, the trend of the table turnover rate and not only just at a single time point, but also in the past 6 to 12 months, rather, for instance, a store with a continuously declining table turn rate and even if it's not in loss at the current stage, we will also intervene. And in terms of the ones that we're seeing a positive turnaround, and we'll encourage the local managers and the division head to further improve. Number three, we look at whether the problems are management related, which we will change and update the management. And if it is about the market related and then we'll review our overall market strategy and to make adjustments accordingly. That's my answer. We also hope that the company can achieve better results in the future. [Audio Gap] Hildy Ling: My first question is about your strategy, focusing on both customers and the employees. And we can see that in Q4, the table turnover rate has improved. So if I look at this strategy itself, it in terms of the strategy itself and how will this drive the table turnover rate? And secondly, how do you look at the customer satisfaction? And because in 2026 in terms of this strategy, how would you continue on with the customer satisfaction strategy? And my next question is still asking about the Middle East impact on your business. For the Middle East, of course, that market will be affected and for European, how do you look at the European market expansion and deployment? Those are my 2 questions. Cong Qu: Thank you, Hildy, for your question. The first one with respect to focusing on both customers and the employees, hence, giving profit concessions to customers and our employees, and we not only look at the numbers, but also customer behavior. Last year, our overseas members has exceeded 8.5 million with a continuous natural growth. The second overall overseas table turnover rate has been rising continuously. Customers' willingness to visit actively is increasing. Whether it is repeat purchase or new customers that they're both increasing. And number three, same-store sales growth rate has maintained positive growth throughout the year, reaching 2.2% in the fourth quarter. Among them, the same-store growth in Eastern Asia was 12.8%, indicating that our stores have closer connections with the surrounding customers and our overall grasp of the business district customer group is improving. In terms of the local customers, we have seen that there is an increase in the number and the proportion of the customers who place the orders in local languages. So for instance, in South Korean market, the proportion of the bills placed in Korea exceeds 90%, which is the most direct signal of brand localization and the performance of a repurchase rate varies across the regions, in the regions with a strong growth momentum, both customer acquisition and the repurchase performance and are improving simultaneously in relatively mature regions. So the contribution of our regular customers is more prominent, and we have not disclosed the specific figures of the repeat purchase, but the repeated behavior of members is a core indicator that our system continuously to track. For 2026 is that the customer base construction brought by profit concession strategy will continue to take effect. This -- we have believed that last year, this is a long-term investment and not simply a short-term move. For your next question, Middle East and Europe, yes, indeed, geopolitics is indeed an unavoidable external variable for our overseas restaurant operations. We have a business and the deployment in Middle East and Europe, we have 2 stores in the Middle East at the moment for the short term in terms of some of the projects that we are working on. It has been affected negatively, but we also have authorized to the country manager. They are the ones who know the market very well and to ask them to determine the pace and the timing. In Europe, we also focus on different stores, and we are constantly visiting those stores, but whether we would sign the contract or not, depending on the location such as customer footfalls and looking at the country's macroeconomy as well as the number of population, et cetera. So there are quite a lot that we need to consider. So it's all about the bottom to up and we are very prudent, but we're very, very positive as well for the market. Operator: Thank you, Ms. Qu, for your answer. Hildy Ling: We also hope that next year, we'll see better results from your strategies. Operator: Next question comes from Jun Zeng from Huatai Securities. Jun Zeng: So how do you look at the customers' satisfaction? And at the moment, do you think that the table turnover rate is already quite satisfied? And can you please also share with us in terms of the same-store improvement for the future, how to consider the price dimension? Lijuan Yang: Thank you Mr. Zeng. And stability of table turnover rate is a result of our continuous investment in the past 2 years. There are several directions. We can continue to tap into the potential. Number one is optimization of a time period structure to present our potential for improving table turnover is mainly in off-peak hours, especially the late-night snack scenarios we have carried out a nightclub style, seeing transformation in some pilot stores. And going forward, we'll be looking at some other different investment methods and different types of sales to help us better promote the transformation. And the second is on the customer stickiness. And we already have done quite well, but we do believe that there is a lot of improvement. For instance, using digital tools to reactivate the members and to be able to reach them precisely. And we will want to make the customers change from knowing Haidilao being used to comeing to Haidilao. And number three is the enrichment of the scenarios, not only the birthdays, the parent child activities, the dinners, the late-line snacks and each have an independent customer group. This is the most direct way to improve the table turnover rate and based on different customers at different time periods in terms of the pricing, we are not going to actively raise the average customer spending nor are we going to offer disorderly profit concessions in pursuit of customer flow. And I think that the headquarters that does not have a one-size-fits-all approach, and we'll continue to monitor the market and which is more sustainable than simply our price adjustment. Jun Zeng: That's all very clear, and I also wish the company a bright future going forward. Operator: Thank you, analysts and investors online. We will see you next time. That concludes our conference result announcement today. And thank you, everyone, for joining us on the call. Thank you. Goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and welcome to the Elauwit Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Kreps with Darrow Associates. Please go ahead. Matthew Kreps: Good morning, and thank you all for joining us today to discuss Elauwit's Fourth Quarter and Full year 2025 financial results and business update. The earnings release covering our 2025 results is now available on the Investors page of our website at investors.elauwit.com. We plan to file our Form 10-K for the full year today as well. I would encourage you to review the full text of the release and accompanying financial tables in conjunction with today's discussion. This conference call is being webcast live and will be available for replay on our Investors page. Speaking today on the call are Executive Chairman, Dan McDonough; Chief Executive Officer, Barry Rubens; Chief Financial Officer, Sean Arnette; and Sebastian Shahvandi, our Chief Growth Officer. We will cover our prepared remarks on the business and financial results, then open the call for questions from our analysts and institutional investors. Please note that during this call, management will make projections and other forward-looking statements regarding our future performance. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the earnings release as well as other risks that are more fully described in Elauwit's filings with the SEC. Our actual results may differ materially from those projected in the forward-looking statements. We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ from our current expectations. Elauwit specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. We will also reference adjusted EBITDA, which is a non-GAAP financial measure. A description of adjusted EBITDA, along with a reconciliation of adjusted EBITDA to the most comparable GAAP financial measure can be found in our earnings release. And with that, I will now turn the call over to Dan. Please go ahead. Daniel McDonough: Thank you, Matt, and thank you to everyone who has joined today's call. I'll begin today's call with an overview of the business, then pass to Sebastian for an update on our rapidly expanding sales program. Barry will have a discussion around our operations, and then Sean will provide a few highlights from the financial results. Since we are still a newer company to Nasdaq, let me give a quick summary of our business. Elauwit is a technology-driven broadband infrastructure provider focused on delivering high-speed Internet to multifamily and student housing communities. We install and activate carrier-grade gigabit service via fiber and WiFi 6 access throughout the entire property. We then generate long-lived recurring revenue from these properties under 2 financial models: managed service and Network as a Service, which we refer to as NaaS. Uniquely, we integrate the property owner into the revenue chain, driving new revenue and value creation for them. Ultimately, we expect to create a win-win-win scenario, where we generate high-margin revenue streams for Elauwit, elevate the resident experience and unlock value for property owners. In addition to a growing number of units already under contract, we have a robust and quickly expanding pipeline of new installations, giving us visibility into our growth ahead. To deliver on this, we have built a scalable operating model that we believe can grow to handle almost any number of units and in any location as we take share in a large and fragmented addressable market. At its core, the Elauwit model represents simplicity, service and profit. When a resident moves into an apartment or other multifamily housing unit, they sign a lease, then begin the arduous process of securing Internet access. This usually means a lengthy sign-up process, waiting several days for a technician to be available and then taking a day off work for an open-ended install appointment. Typically, the property owner isn't even participating in this revenue stream. Elauwit simplifies and improves every facet of this experience. The property is prewired with enterprise-grade networking equipment, offering the resident better service and faster speeds. When the resident signs their lease, the Internet fee is included on their rent invoice as a standard cost, but usually at a 10% to 15% less expense than the conventional products I just described. Instead of waiting days for an install, they get their log on credentials when they get their keys, providing immediate Internet access, not just in their unit, but property-wide in all of the amenities. That alone is a compelling case, but we take it one step further by integrating the property owner into the monthly recurring revenue from the service, which provides a source of profit and the increased recurring cash flow that can increase the value of their property. We offer 2 approaches to this incredible service in what we estimate is more than a $25 billion market opportunity. For both approaches, the entire property is turned on and serviced and the monthly fee is included in the resident's cost by default, ensuring full subscription to the services. Option 1 is a managed network approach, whereby the property owner pays us an upfront fee to construct and install the network throughout the property. The property owner then collects a monthly fee from the resident that goes in part to them for their installation cost and profit and partly to us for our services under a 5- to 7-year contract. This model works well in new construction or with large and financially sophisticated properties seeking retrofit upgrades. Option 2 is Network-as-a-Service, or NaaS, a deal for retrofits for smaller property owners. Under this model, we can use our public company balance sheet to install and own the network, then collect a higher recurring monthly fee from the property owner to operate under an 8- to 10-year contract. Both models mirror the data center or alarm company model where customers stay for years, generating what we expect will be high-margin service revenue. We are now moving ahead quickly to expand our pipeline of targeted managed services and Network-as-a-Service opportunities with a major marketing and sales campaign. Sebastian will speak more to this point in a moment, but I'm very pleased with the initial results of our newly unleashed revenue engine, and I look forward to what the year ahead can bring. And that brings me full circle to my opening comment that Elauwit represents a compelling growth case of high-value recurring and long-lived revenue. And with that, I'll turn it over to Sebastian to talk through our new sales and marketing program to deliver on that opportunity. Sebastian Shahvandi: Thanks, Dan. We've built a fully integrated go-to-market engine that brings together inbound and outbound strategies into a single coordinated system. At the center of this model is a clear, consistent focus on customer experience, ensuring that every interaction from the first touch to long-term partnership is intentional, seamless and value-driven. Our approach is powered by a modern AI-enabled marketing and sales stack, custom designed not just for speed and scale, but for relevance and personalization. We're leveraging a broad set of AI tools to enhance data quality, improve targeting precision and deliver a more meaningful engagement at every stage of the journey. Our programs span multiple ICT and persona-driven channels, including our website, targeted account-based outreach, organic and paid social media and structured outbound campaigns. Let me give some additional detail to illustrate just some of the diverse channels we're using to identify and engage property owners. A central pillar of our 2026 strategy is an aggressive industry event calendar, 22 regional events and conventions. However, our approach is not focused on booths and exhibiting. Instead, we invest in pre-event outreach to identify and schedule one-on-one meetings with decision-makers before we ever arrive. And early results are encouraging. With just 3 of the 22 events completed, event source deals currently represent approximately 1,800 units in our active pipeline. Adding to this, paid media efforts are gaining attraction with about 6,000 units in active bidding sourced via paid ads and 127,000 impressions across Google, LinkedIn and Meta ads. Our channel partner program is also demonstrating significant forward motion with almost 7,000 units of new business pipeline attributed to the partner activity. All in, we're actively targeting approximately 2,000 new business accounts right now, representing an addressable base of roughly 12 million units through these and other strategies. And I want to remind everyone, the results reflect only a couple of months of initial work given our RevOps organization was only formally launched at the beginning of Q1. Even so, business attributed to the new RevOps organization now represents 63 opportunities, 13,000 units in discussion and an addressable base of roughly 315,000 units in total across the property owner portfolios. New business sales currently represents 254 opportunities. The continued momentum in new logo growth reflects both increased marketing activity and deeper alignment with customer needs driven by stronger engagement over the last 90 days. But it isn't just about new properties. We can also mine our existing customer base for more properties. Our current customer base represents approximately 387,000 addressable units for expansion, and our focus remains on deepening relationships and continuously improving the customer experience. From a solution mix perspective, approximately 88% of our pipeline is comprised of managed services, 9% on managed services finance and 5% as Network-as-a-Service. While many early-stage opportunities are currently positioned as managed services, we see a strong opportunity to expand NaaS adoption as deals progress, particularly with smaller portfolio customers where flexibility and ease of deployment are critical components of the customer experience. As we continue to scale this engine, we're already seeing improvement in both deal creation and pipeline velocity. Just as importantly, we're creating a more efficient and customer-centric sales process. This includes a soft quote process built for our Network-as-a-Service offering, enabling us to reach consideration in the funnel weeks faster than before. Our goal is to reduce the sales cycle, while improving the overall buying experience. We're already seeing a strong indicator of traction, pipeline growth and increased alignment between our go-to-market efforts and the needs of our customers. With that, I'll turn the call over to Barry. Barry Rubens: Thank you, Sebastian, and good morning, everyone. We're excited to be here and to deploy our expanded balance sheet for growth. Elauwit built a strong base as a private company, but being a listed company provides the access to capital to expand our market reach and drive growth. With our enhanced balance sheet, we are now funded to pursue the 70% of the market opportunity that was available, but not accessible to us before by virtue of the Network-as-a-Service model. While Sebastian described our rapidly growing sales opportunity set, once signed, we track our revenue-generating business across 3 nested metrics. Those are contracted units or those waiting to be built or in the process of installation, activated units, units that are fully installed and turned on for service, but may not be fully billing yet due to onboarding and billed units, units that are fully generating monthly recurring revenue under our managed service or NaaS contracts. As a reminder, Activated units represent the rollover period throughout the 12 months following installation, and we onboard their costs pro rata to align with property lease renewals. In short, when we complete an installation, we know that we have 12 months of growth ahead, then long-term sticky recurring revenue for years to follow. Giving some numbers to the categories based on December 31, 2025 counts, contracted units, those waiting to be built or in the process of installation, along with units we currently serve increased 34% to 34,067 from the 25,375 at the end of the prior year period. Activated units, units that are fully installed and on but may not be fully billing yet due to onboarding increased 92% to 22,255 from 11,588 at the end of the prior year period. Build units, units that are fully generating revenue under our managed services or Network-as-a-Service contracts increased 77% to 16,445 from 9,279 at the end of the prior year period. And our pipeline continues to grow, taking a slightly different filter on the numbers Sebastian presented, -- of the 121,000 units in our pipeline, we now have 9,221 units in the contracting process. Those have been verbally awarded to us by the property owner. And we have 32,968 in the proposal phase. I should remind everyone that the majority of new contracted units remain as managed services, since we only began selling NaaS proactively as a model following our IPO in the fourth quarter last year and added our sales team in the first quarter of this year. I should also note, and Sean will elaborate more, that our revenue includes the recurring services sales as well as installation sales. While we have largely been focused on managed services to date, we expect recurring revenue to increase as a percentage of total revenue over the coming years due to: 1, the rising number of billed units on long-term multiyear contracts; and 2, the rising contribution of network installation -- Network as-a-Service installations that bill typically at a higher monthly rate. We anticipate that recurring revenue will grow steadily because of the sticky nature of these contracts and may be enhanced further by the shift in favor of Network-as-a-Service throughout 2026 and well into 2027. I'd also like to take a moment to note that our sales universe is vast. We're currently in about half the states and our business model uses a highly scalable call center for service to residents, plus contracted installation teams that we can easily flex and scale as needed with minimal cost to us. This approach means that rather than targeting specific markets, we can readily go anywhere our property owner clients want us to provide service. We believe we have good growth visibility just from the business we have already contracted and exciting upside from the new sales team to expand our growth prospects, providing a compelling business built on a growing percentage of recurring revenue under long-term profitable contracts. And with that, I'll hand it over to Sean to briefly cap some of our business highlights from the quarter and year-to-date. Sean Arnette: Thank you, Barry. Today, I'll walk through financial highlights of our fourth quarter and full year 2025 that continue to show robust growth. Revenue for the fourth quarter increased 85% to $6.1 million compared to the $3.3 million for the prior year period. Cost of revenue increased to $5.5 million for the fourth quarter compared to $3 million for the prior year period. As noted in our previous call, network construction activity, both in terms of cost and margin can be lumpy and incur substantial costs upfront, but leads to long-lived recurring revenue. Gross profit increased to $0.5 million for the fourth quarter compared to $0.3 million for the prior year period. Our gross margin for the fourth quarter period remained at 8.6% compared to the prior year period. Management is currently implementing cost reduction actions intended to bring our network construction gross margin back into our expected range of approximately 15%. Operating expenses were $2.8 million for the fourth quarter compared to $1.3 million for the prior year period. As planned, we are investing in sales and marketing expansion coming into 2026 to drive additional growth in top line sales and recurring revenue. We reported an operating loss of $2.2 million for the fourth quarter compared to an operating loss of $1 million for the prior year period. Net loss was $2.3 million compared to $1.1 million for the fourth quarter last year, driven by our investment in our sales and marketing teams as well as public company-related expenses. Adjusted EBITDA in the fourth quarter was a loss of $2.2 million compared to a loss of $1 million for the prior year period. On a full year basis, revenue increased 154% to $21.6 million compared to $8.5 million for the prior year period, demonstrating increased network construction and activation activities driving the ramp in our recurring service revenues. Cost of revenue increased to $17.6 million for the year compared to $7.3 million for the prior year period. Gross profit increased 244% to $4.0 million for the year compared to $1.2 million for the prior year period. Our gross margin for the full year increased to 18.5% compared to 13.7% for the prior year period, primarily due to increased network activations and greater recurring services revenue in which we realized higher gross margin levels than with our network construction activities. Operating expenses were $7.7 million for 2025 compared to $4.4 million for the prior year period. Growth in our network construction and operations teams, investment in sales and marketing and expenses associated with the preparation for an existence as a publicly traded company drove the increase. With our NASDAQ IPO and related capital raise, we now have a balance sheet capable of funding increased Network-as-a-Service activity and other initiatives designed to drive growth and increase the contribution from long-term recurring revenue sources. With that, I'll turn the call back over to Dan. Daniel McDonough: Thanks, Sean. I'd like to remind everyone that we are available to meet with institutional investors. If you would like to arrange a meeting, please do so through one of the investor events, if attending or via Matt Kreps, our Investor Relations contact, whose contact information on our results release and on the IR website. And with that, I'd like to ask the operator to open the call for questions. Operator: [Operator Instructions] The first question today comes from George Sutton with Craig-Hallum. Unknown Analyst: This is Logan on for George. I want to start with the -- I believe it was 9,000 units in the contracting phase and 32,000 units in the proposal phase, if I got those numbers right. Barry Rubens: You are correct. Unknown Analyst: Okay. Great. How fast would we expect those to potentially move to being contracted units? And I would extend that question to the 8,000 units of incremental bidding opportunities that you called out in the press release. Just how long would it take to potentially win those? Barry Rubens: The majority of the 9,200 units in the contracting process will be complete in -- by the end of April. And the majority of those units are to be completed by the end of 2026. If I look at the 33,000 units in the proposal process, -- and I simply apply the success rate we indicated we had last -- in earlier periods of 25% to that, which I think is going to be low. That would represent another 8,000 units that we'd expect to have contracted before the end of the year. Unknown Analyst: Got it. Helpful. I'm curious if you could talk about what you're seeing or hearing with some of the really large property managers out there who have shown a desire to potentially move portfolios over to a managed WiFi structure. Just is it an area that you feel like you're making some progress? And how material are some of those opportunities right now? Barry Rubens: I'll take that question. The process of larger companies moving their portfolios over to typically managed services because they are larger companies with established balance sheets is accelerating throughout the marketplace. We are actively involved with conversations with several parties that have a desire to move their portfolios rapidly over to managed services over the course of the next several years. And we believe it could have a material impact on our results looking at 2026 and 2027. So -- in addition to that, as we're seeing larger companies very rapidly make this move over to managed services, it's not lost on me that midsize and smaller companies are paying attention. I literally was in a meeting this past week where someone indicated they felt like they would be at a disadvantage, if they did not move forward with this and capture the 200 basis points of NOI that's available to them. So what we're seeing is an accelerating movement to managed services, led by larger companies. We think that's going to be followed by medium and small-sized companies. Unknown Analyst: Got it. So it certainly sounds like there's a lot of early success with kind of the new sales and marketing efforts. I'm curious, as we sit here today with, I think you said 5% of the pipeline being Network-as-a-Service, how do you go about trying to increase that share over the next year from a sales and marketing perspective? And just any color on kind of the strategy to expand that part of the business would be helpful. Barry Rubens: Sebastian, would you like to handle that? Sebastian Shahvandi: Yes, absolutely. Great question. Look, as we have a focused approach to where we're targeting and how we're going about it, our -- some of our focus is going towards the smaller customer base or the smaller prospects that have moved to lighter portfolios and capital is not readily available for them. In order to get to the kind of NOI increase that they want, the Network-as-a-Service offering is the best offering for them that they can start quicker with real capital out of their pockets. And so by targeting those specific size portfolios, we're able to have more penetration into that growth side of that business as well. Operator: The next question comes from Derek Greenberg with Maxim Group. Derek Greenberg: Just continuing off the last one. I was wondering maybe how you view the potential time line in terms of beginning to generate revenue from the Network as a Service offering. Sebastian Shahvandi: Well, Barry, I can take this as well. Sure. Look, Network-as-a-Service offering is a conversion, right? It's not like new builds that we have to wait after the contract is signed for the property to be built up and so on. Network-as-a-Service, typically, if you look at from contracting being done inside, you can look at 3 to 6 months for it to get started depending on the size of the property and the kind of the work that needs to go into it. We're also seeing on a lot of these conversations that we're having with the Network-as-a-Service offering with the current prospects is the conversation moves a little bit faster than new builds as well. So all in all, as I mentioned, post contract signing, you can think about 3 to 6 months to starting the revenue side. Derek Greenberg: Okay. Great. And then in terms of just your expenses. I was curious looking at the fourth quarter this year, how much of G&A was like onetime expenses related to the IPO? And what do you expect expenses to kind of revert to or hover around going forward? Barry Rubens: Sean, I'm going to let you handle that question, if that's okay. Sean Arnette: Sure, absolutely. Derek, we certainly did have an increase in our SG&A in the fourth quarter due to the offering. I think, it was in between 15% and 20% of that was onetime in nature that we don't anticipate continuing. Fully expecting SG&A to come down a bit as we move into 2026 here with a slow ramp through the year in line with the growth of the business. Derek Greenberg: Got it. That's helpful. And then in terms of sales and marketing and specific with the new team investments in that area, I was wondering maybe at scale, what you project it could represent as maybe a percent of sales or percent of total expenses? What do you expect the investments in that to get to over time? Barry Rubens: Sebastian, you and I have gone through that before. Why don't you talk about kind of what the target run rate is for new sales and marketing expenses. And then, Sean, we can put it into a perspective with respect to overall cost of the organization. Sebastian Shahvandi: Sure. I mean for 2026, I think it's around $1.5 million for sales and marketing combined. Sean Arnette: And in terms of overall SG&A, we're looking for that to be about 20% of the expense of the business. Derek Greenberg: Okay. Great. That's super helpful. My last question is just on gross margins. I was wondering if you could maybe talk a little bit about the potential for the business overall as recurring revenue scale. Barry Rubens: Sean, I'm going to let you handle that question. I think it's still in line with what we discussed during the IPO. Sean Arnette: Yes, absolutely, Barry. Derek, the long-term forecast hasn't changed from the discussions at the end of last year during the IPO process. Ultimately, we expect around 15% gross margin on our network construction activities, whereas the recurring service revenue is really where we're going to generate the gross margin for the business with managed service projects realizing in the neighborhood of 60% gross margin over time and Network-as-a-Service projects closer to 75% over time. Operator: The next question comes from [ Deane Pernis ] with Pernis Research. Unknown Analyst: Congrats on the quarter. Had a couple of questions. Number one was in regards to Network as a Service with your sales and marketing. So when you first, I guess, start conversations with these customers, do they -- are they aware of your services? Does it kind of start from a level of 0? Or are they already kind of familiar with services you provide? I'd love to just know more about that. And secondly, on kind of future financing, I would love to know how you're planning on financing future growth through equity versus debt and if you're in talk with any capital partners or facilities that you're in talks with? And just how you feel about the balance sheet as of right now? Barry Rubens: Dean. Thanks for joining the call. Good to hear from you. Sebastian's team has been engaged most recently with folks. So I think on that first part of the question in terms of the familiarity that our customers have, maybe Sebastian, you can add some color to that. And then I thought Sean could handle the balance of that. Sebastian Shahvandi: Happy to. So as far as your first question, do they know us as far as what offerings we have? The way we approach it is this. When we are going after prospects, as I mentioned earlier on our earnings kind of report, the approach is very strategic. It's very well targeted. So we have a really good idea of the portfolio size of customer base we're going after. And in that way, as we approach them, we know which ones to position first and second. That being said, we don't exclude any of the offerings that we have. But if we're going after someone who has a smaller portfolio, we let them know that the NaaS offering with 0 capital expenditures from their side could be more attractive to them. And then if they have funding available or capital available for themselves, we provide them the managed service offering as well. So it's not a one or the other. It's more of here's everything that we have available, starting with the size of the customer, the persona we're going after and who we're talking to at that point. Sean Arnette: Sorry, Dan, I'll address the rest of the question in terms of the balance sheet, which for Elauwit is stronger than it's ever been right after the IPO. We feel great about the position we're in and the ability to leverage that balance sheet for project financing. So when we look out, we certainly expect to be able to fund Network-as-a-Service projects predominantly from debt with a small bit of equity capital off the balance sheet. We are talking with a variety of different type of capital partners working to tease out the most efficient way of delivering financing for these type of projects. But we do have one existing relationship as disclosed in our filings with Endurance Financial, a debt partner that has supported us from the early days and ability to move very quickly should Network-as-a-Service opportunities come about quickly, but certainly looking to find a bit of efficiency in terms of how we fund projects moving forward. Operator: This concludes our question-and-answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, everyone, and welcome to the CXApp Fourth Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Khurram Sheikh. Sir, the floor is yours. Khurram Sheikh: Thank you, Matthew. Good afternoon, everyone, and thank you for joining CXApp Fiscal Year 2025 Earnings Call. I'm joined today by our Chief Financial Officer, Joy Mbanugo. I am Khurram Sheikh, Chairman and CEO of CXApp. Before we begin, I want to frame today's discussion. 2025 was a year of deliberate transformation. 2026 is a year of AI-driven acceleration. Today, we will walk you through what we accomplished, where the market is heading and why we believe 2026 represents a true inflection point for CXAI, as we know, you pronounce as sky. With CXAI, we are moving beyond simple workplace apps to an autonomous agentic platform where we define the employee experience. Let me start by directing your attention to our safe harbor statement over the next few slides. Please read at your leisure once you have the slide deck. All right. For those newer to the CXAI story, let me give you a quick snapshot of who we are. CXApp trades on NASDAQ under the ticker CXAI. We're headquartered in the San Francisco Bay Area with offices in Toronto and Manila, giving us a global engineering and delivery footprint. CXAI is a global AI-native workplace experience platform deployed across 200-plus cities, 50-plus countries with over 1 million plus users. We built this with a lean and highly technical team with over 70% focus on R&D, which is critical given our pivot into Agentic AI. Importantly, we now have 39 patents filed, including a new provisional filed on Agentic AI just recently, and we're really proud of that filing because it is a landmark in our space. And then we also have -- already have 18 granted patents. This patent portfolio is not -- is a meaningful competitive moat. This is not just a product company. This is becoming a defensible AI platform company. We maintain enterprise-grade compliance with ISO 2701, SOC 2 and GDPR certification. This is a global enterprise-ready platform with the security credentials that Fortune 500 procurement teams aspire to. So very proud of that. We're proud of the accomplishment of the team over the last year, and we're going to share with you what this strategic transformation has been about and why this is a really great point for our investors to understand what is really happening in the market. So I want to start with the market. Why is this timing right for CXAI, right? We are seeing a fundamental market shift in enterprise workplace technology. Three forces are converging simultaneously. First, hybrid workplace orchestration. Fortune 500 enterprises are actively procuring unified platforms that consolidate desk booking, room booking, parking, dining and attendance into a single workflow. They want calendar and HR system integration with AI-driven smart bookings. The days of coming together 5 or 6-point solutions are ending. Secondly, AI and specifically Agentic AI have moved from nice-to-have to require or must-have. Enterprise buyers are now mandating AI agents with 3-year road map. They want conversational assistance, proactive suggestions, auto routing and AI-enhanced incident reporting. This is not a future requirement. This is the current RFP today. And this is why we're seeing this good momentum because we've seen a lot of RFPs from large enterprise that are exactly what we've been working on. And thirdly, we have started our journey with indoor intelligence and IoT, the Internet of Things. Enterprise want interactive map with real-time occupancy data from IoT sensors, wayfinding, colleague finders and visitor management with multimodal physical and access control. That kind of gives us a new advantage in terms of the AI world. It gives us that localization and edge experience. So CXAI, CXAI sits at the intersection of all these 3 trends. We're not chasing the market, the market is coming to us now. And that's why we see as way, way different from 2025. Now what is happening with Agentic AI and the defining trend there? Let me put some numbers behind the AI opportunity. By the end of 2026, Gartner estimates that 40% of enterprise apps will feature task-specific AI agents, up from less than 5% in 2025. This is an 8x increase in a single year, and workplace is identified as a primary deployment domain booking, service request, contextual suggestions. This is exactly what we built. The AI agent market currently sits at $7.8 billion and is projected to reach $52 billion by 2030. Gen AI model spending alone is growing at north of 80% in 2026. On the adoption side, 88% of organizations now report regular AI use in at least 1 business function. Enterprise software spending is up to around 15% year-over-year, driven primarily by AI investment. The validation from Fortune 500 buyers is clear. They now require AI agents, conversation systems and AI road maps in their procurement decisions. They are specifying exactly what CXAI does. And as you all know, we didn't pivot to AI. We've been building towards this for years. The market has now validated our thesis. So what I see is this is really a platform shift, Agentic AI becoming the control layer of enterprise software and CXAI is positioned directly in that layer as the interception on workflows, data and physical environment. You heard at GTC, Jensen talked about physical AI. We are the physical AI for that workplace environment. So I'm super excited about the direction the market is heading and what we've been accomplishing over the last 2 years with our Agentic AI platform. It's interesting when I have been working with our sales team on all the different opportunities that come in. It is super interesting to watch that our competition is actually no longer there because with our Agentic platform, our clients are coming to us saying, this is what we actually want. We want you to be successful and build it for us. So all the new clients coming in are asking for Agentic AI as critical, as part of the road map. Without it, they will never deploy a solution and the existing customers are naturally evolving to this very rapidly. So let me summarize also what has been the strategic transformation in 2025 and what do we actually do? We executed a comprehensive strategic transformation built on 4 pillars. First, we focused on high-quality recurring revenue. We mean a deliberate decision to prioritize subscription revenue over onetime services and implementation fees. That shows up clearly in the numbers, which our CFO, Joy, will walk through shortly. Secondly, we implemented an AI-driven cost structure. As you know, we have a partnership with Google where we are implementing a lot of the GCB-based solutions. We're a big AI user. We're using Gemini. We're using all the different tools out there with different providers. I won't name all of them because some of them maybe have said that we're not using them, but we're using a number of those guys. But it's all driven towards productivity and to drive operational efficiency, reduced cloud cost in automating the process that previously required manual effort, that AI-driven cost structures across all our functions, be it engineering, be it sales, be it marketing, and that has resulted in, as you've seen the numbers, a much reduced cost structure for us. Thirdly and most importantly, we built our platform from the ground up as an AI-native CXAI platform. This wasn't a bolt-on. We will talk about BOND and CORTEX. They were our key orchestration and intelligence layer solutions. We had designed from day 1 as core platform components, not afterthought. And fourth, we balance short-term impact with long-term scalability. Yes, revenue declined in 2025, and we're transferring above that, but the revenue we have today is dramatically higher quality and the platform we built positions us for a sustainable, scalable growth in 2026 and beyond. I'm going to talk a little bit more about the impact of all of that to our clients and to the end market. This slide illustrates the fundamental transformation we made and how our product delivers value. Because a lot of the customers ask a question, so what? Why is this so important to me, what's the ROI? What's the value? And given all the information out there on AI and Agentic AI, all the promising we made, why is our solution relevant? And this is where we want to show you what the legacy systems are and what our system. We're going to describe those systems in detail later, but I want to show the value and outcome, right? If you look at the legacy world, workplace tools required multiple clicks, manual configuration, fragmenting analytics across different tools. That's what most of our competitors still offer, right? With our AI platform, we replaced those pain points with 4 core capabilities. BOND + CORTEX replaces multi-click workflows with instant actions and autonomous workflows. CXAI VU replaces static analytics with real-time insights that produce actionable outcomes. Our One-Map engine and experience engine replaces fragmented tools with a single source for all workplace data and actions. And finally, our Zero-Touch deployment replaces months of manual configuration with site deployments measured in days now versus months. This is an incremental improvement. This is a category shift from SaaS to intelligent AI platform. And it's the reason enterprises are choosing CXAI over legacy alternatives. And that's being delivered from us in terms of our design, our capability and how we thought about making this system frictionless for our clients. So I'm going to pause now and turn it over to the CFO, Joy Mbanugo to go through the financial results, and I'll be back with the strategic implications for 2026. Joy, over to you. Joy Mbanugo: Thank you, Khurram. Let me walk you through the financial results for fiscal year 2025. I want to start by framing how we think about the past year. As Khurram mentioned, fiscal year 2025 was a year of intentional and strategic reset. We made very deliberate decisions to exit lower quality revenue, transition the platform from SaaS to AI and build a more durable foundation. Those decisions had a short-term cost, and you'll see that impact on the top line. But the underlying health of the business has improved meaningfully, and I want to walk you through exactly why. Starting with the headline numbers on Slide 10. Total revenue came in at $4.6 million compared to $7.2 million in the prior year. I'll address the decline directly in a moment, but first, let me highlight what moved in the right direction. Subscription revenue now represents 98% of total revenue up from 87% a year ago. That shift matters because subscription revenue is recurring, predictable and very high margin. It's a foundation that every AI -- before it was SaaS, and it's the foundation that every AI company wants to be built on, and we're essentially there. Gross margin expanded to 87% in up 5 points from 82% in 2024. That improvement came from disciplined cloud cost management and platform efficiency gain. It demonstrates the operating leverage in our model. We ended the year with a really healthy cash balance of $11.1 million as of December 31, strengthened by various capital raises throughout the year. And that gives us a real runway to execute for the rest of this year. So we have enough cash to cover our expenses for the next 6 quarters. On a per share non-GAAP basis, our diluted earnings per share was negative 58%, improving from last year, which was negative $1.2. So yes, revenue decline, but the business that remains is fundamentally stronger than what we started the year with. Can we go to the next slide? So now I go line by line on the P&L, so you have a more robust picture of what happened over the last year. Revenue was $4.6 million, down 36% year-over-year. This reflects 3 things: the exit of noncore and low -- noncore contracts and professional services, customer churn during our platform transition and reduced bookings during the positioning period. We expect that some of this decline, and it's the cost of doing the reset correctly. Cost of revenues dropped 55% from $1.3 million to $578,000. That declined significantly outpaced the revenue decline, which is exactly what drove the margin expansion. We became materially more efficient at delivering the product. Gross profit was $4 million at 87% gross margin, up 5% -- up 5 points year-over-year. For context, that puts us in best-in-class with other companies in this area. This is a structural improvement, not a onetime event. Now on to operating expenses. Total OpEx was $21.6 million, up 10% from $19.6 million. I want to be direct about what drove that. R&D modestly increased by 4%, but that was intentional and we'll continue to invest in R&D while we continue to invest in AI and improve in the product. We believe that this investment is what's going to position us for double-digit growth in 2026. Sales and marketing was cut by a significant 36% as we use AI in our marketing efforts and made our go-to-market motion leaner, more targeted enterprise sales approach. G&A increased 10% and part of that is restructuring related, we're actively managing this down this year. The most important part in OpEx is the goodwill impairment of $2.1 million. This is a noncash accounting charge. It does not reflect cash outflow. It does not affect operations, and it's not recurring. It is the primary reason that OpEx increased year-over-year. Excluding that item, our operating cost base was essentially flat. Loss from operations was $17.6 million. Adjusted for the goodwill impairment of $2.1 million, the underlying operating loss was approximately $15.4 million, roughly in line with the prior year even as we continue building this platform. Now let's walk through the EBITDA bridge. If we can go to the next slide, please. Going through EBITDA and adjusted EBITDA, this is really important because this shows where some of the operational improvement comes from. Starting at a net loss of $13.5 million for the year, is already a meaningful improvement from $19.4 million of last year. And in back interest, taxes, depreciation, we arrive at negative EBITDA at $10 million compared to negative $15.6 million EBITDA in 2024. That is a 35% improvement year-over-year. This is a number I would point you to as the clearest measure of our operational progress in 2025, their trajectory is definitely trending in the right direction. Now adjusted EBITDA came in at negative $9.8 million compared to negative $8.3 million in 2024. I want to address this directly because on the surface, it could look like a step backwards. And I don't want that to go unexplained. The entire difference comes down to 1 line, our change in fair value of derivative liabilities. And if you remember from last year, this is related to our convertible notes. In fiscal year 2024, this line item was a positive $3.2 million and it flattened adjusted EBITDA. In 2025, it looked to a negative $4.5 million. That is a $7.7 million noncash swing driven entirely by mark-to-market accounting on derivative liabilities. This has 0 impact on our cash position, 0 impact on our operations. It is purely an accounting timing item. If you strip that 1 item out, adjusted EBITDA improved year-over-year. The other adjustments are pretty straightforward, stock-based comp, $2.8 million to $2.1 million of goodwill impairment, we already discussed in smaller items that net close to zero. The real punchline is that our $11.1 million cash balance more than covers our cash-based operating loss. We have the necessary runway to execute, and the hard part of this transition is behind us. If you remember last year, we ended with a significantly lower cash balance. And so we're starting off 2026 very, very strong. Now let's talk about pipeline and sales momentum, which is really exciting to discuss. As Khurram mentioned earlier, I think if we were at this time last year, we had momentum, but the momentum we see now as enterprises move towards Agentic genetic AI is really exciting. And even at CFO conferences and other tech conferences, you can see the excitement and the flurry of activity as people think about moving away from pure SaaS platforms and look into adopting Agentic AI. So where does that leave us as we head into 2026? The pipeline is growing. We are seeing expansion activity within existing enterprise customers. Accounts that have been on the platform are now asking for more. We are seeing new vertical opportunities that we're not pursuing 12 months ago, and we are seeing early signs of acceleration in bookings. In Q4 2025, we had really strong bookings and that has really continued into this year. On the market signal side, 3 things stand out. First, enterprises are consolidating, as you can see in the news, they're moving away from point solutions towards unified experience solutions that is exactly what CXAI is. The procurement conversations we are having today are fundamentally different from a year ago. Buyers are not comparing us to individual tools, they are evaluating us as a complete platform. Second, and very importantly, Agentic AI has become a buying requirement. Executive buyers like CFOs and real estate -- people that own real estate are now specifying AI agents, conversational agents and 3-year AI road map as a baseline requirement before they sign, before you even having a conversation, and we have built exactly that. The platform spent rebuilding is what enterprise procurement teams are now asking for by name. Third, and this is the 1 that gives us the most confidence, customers are telling us that they need our agentic capabilities to make their final buy decision. That is a closing signal, that is pipeline converting. 2025 was a strategic reset, 2026 is where that investment pays off. With that, I'll turn it back to Khurram, who will go through the rest of the presentation. Khurram Sheikh: Thank you, Joy. So let's talk about 2026 outlook. Looking ahead to 2026, we expect AI-driven acceleration to deliver double-digit growth. Let me outline the 4 pillars of our outlook. First, our Agentic AI platform, BOND + CORTEX is in market now and it's generating a lot of enterprise interest. As I said, all the RFPs we've responded to, all the wins that we're getting in this quarter and the coming quarter are all driven because customers have tested and evaluated and understood that what we have, is our road map, is the right thing. And this is our primary growth engine for 2026 is because of that differentiation. Secondly, we expect large enterprise wins and a strong power pipeline conversion as Joy mentioned, we've been involved with a lot of these RFPs for a while. I think it's very competitive. And the competition is not just smaller companies. They're also looking at much larger enterprises that are looking into solutions in our space. And the good news is we are winning. And we're winning big in terms of these client opportunities. So I'm very hopeful on that. These deals are in our funnel today are larger and more strategic than they were ever before. And the reason is because Agentic AI is so critical to an enterprise. It is not a senior manager level decision. This is a C-level decision. At the CIO, the CTO, the CHRO, the Head of Real Estate and even the CEO of the company. This is [ sacrosan ] for them. So that's why they're deliberately taking the time to test it, to validate. They do the RFP and then they show up in our labs, CXAI labs here in the Bay Area and they're wowed by our engineers and our team, and they go back and tell their procurement guys, we need to get CXAI. And that's what's happening. And so I'm super excited about that. So we're confident we're going to achieve those large enterprise. They take a little longer, but they are for the long run. Certainly, strategic partnerships and particularly in vertical AI. And this is creating new distribution channels for us. We'll talk about our TouchSource partnership, that alone gives us access to over 11,000 digital directory deployments. Huge opportunity for us to partner with them and to scale our business through those distribution channels. And we'll talk about more in the coming weeks and months, but that is super exciting 1 for us right now. And fourth, we are committed to sustainable, high-quality revenue growth. We will not sacrifice the quality of our revenue base to chase top line numbers. Growth will come from subscription expansion, not onetime fees. So we stay with that philosophy. I think with the Agentic AI world, the monetization mechanism changing too from not just pure subscription, but also for outcome-based, and I think we're super excited about those opportunities, especially with the new clients who are coming in with a fresh perspective of the market. The 2025 reset is behind us. We entered 2026 with a stronger product, cleaner revenue, better margins and a validated market demand. That, to me, gives me confidence and hope that we're going to be super successful in 2026. So let me talk about some of these elements in more detail. And I'll start with the product road map. So this is a clear evolution and revolution from CXAI. CXAI 1.0 is our current platform. That's where all our current clients have. It's a single code base, delivering space booking, navigation, enterprise, SSO integrations and the full mobile app experience. This is what's in production with everybody, and this is still going to be around for a long time because it's the basis. And it gives us a strong leverage in terms of building CXAI 2.0, which is our major evolution, and it's going to be released in June 2026 with our new clients as well as the existing clients who are upgrading there. And this includes our behind the scenes or access control and [ Agentic ] system, plus our One Mapping engine, delivering a unified One Map experience. It has the Agentic AI interface powered by BOND and CORTEX. Achieves full web parity with our mobile experience and enables Zero-Touch campus deployment. CXAI 2.0 is the version that unlocks our next phase of enterprise open. So all the new clients I talk about are getting CXAI 2.0. They're already having their sandboxes, they're doing their first MVP deployments. And by June, they will be launching their campuses, their first deployments with that, and this is going to be the growth engine for all the new clients and then the existing clients are all wanting to upgrade to CXAI 2.0. So a huge opportunity for us, and this has been the making in the last 12 months. Looking further ahead, our future vision is CXAI Sky. What I mean by that is tongue-in-cheek, it's really the full Agentic AI-driven user experience with predictive intelligence. It includes reactive and generative UIs, zero-friction onboarding and also enables a new segment besides the large enterprise it enables mid-market expansion. This is where the platform really goes, and this is where the opportunities with the distribution partners, with what we mentioned TouchSource earlier in terms of certain vertical markets, a huge opportunity. This is now an MVP right now in our labs, in our CXAI labs. So if you're in the Bay Area and you want to play with CXAI Sky, come talk to us, we'll give you access. We're testing it in all labs. We're going to go to certain initial clients locally here, but this, we think, is a big opportunity for us in both 2026 and 2027. So building for the future already. And by the way, we're just not building features. We're building a platform that gets smarter and more autonomous with every single deployment. So this platform is solid. It's very exciting, and we just also filed our provisional patent, a broad patent on Agentic AI. I've got the number in there when we talk about it in the next slide about the Agentic AI platform, but it really is a landmark in our industry and we're very excited about it. We're going to have multiple filings beyond this. But I want to go under the hood since we filed the IP, the patent provision is there, I want to go under the hood and tell the world what we actually have done and what are our very strong technology team here in CXAI labs has accomplished. One of the things on the left you see is our Unified Data Fabric. This is the ingestion layer that connects IoT sensors for occupancy data, calendar systems for scheduling, enterprise systems like HRIS and IT and spatial data from maps and navigation. This is kind of combining all the integrations we do, and now we're going to connect them all together. That data flows into our Intelligence and Orchestration layer, which has 2 engines, CORTEX is our intelligence engine. It handles predictive analytics, natural language processing, context understanding and intelligence extraction. BOND is our Agentic partner. It provides autonomous orchestration, proactive recommendations, task execution and multisystem control. Think of BOND as a multi-agent solution that allows multiple agents to work together, orchestrate and then with CORTEX knowing the personal recommendations, the preferences the things that matter contextually and making the right decision. What we do is something super unique that nobody else does because we take in account what's really happening in the campus, in the site at Agentic AI, what is happening within the enterprise, and we stay within the enterprise. That is really the core of our IP and patents and what we believe is going to unlock a lot of shareholder value. On the right, you see the actual outcomes this produced. And this is what our clients want. This is what our users want, smart navigation and wayfinding, instant booking of rooms, desks and services, workforce analytics for real-time decision support, space optimization with automated utilization management and proactive context-aware alerts. This is where the world is headed. This is what they want, and we are going to be delivering this very soon to all our clients. The key insight here is that we are transforming passive data into proactive operational force multipliers. This is not a dashboard. It's a system that takes action on behalf of the enterprise, and that's the core of Agentic AI. So let me talk about this another pillar, which is really our strategic partnerships. And we believe this is going to be transformative for our distribution. Our partnership with TouchSource is a joint marketing, sales and product strategy that extends and also embeds CXAI's Agentic AI as the intelligence layer for TouchSource existing base of over 11,000 digital directory deployment. We signed an MOU. We've signed a marketing and co-selling agreement with them. We're super excited working with the team, and we've had -- we've already got some really key targets lined up. This partnership really extends our workplace AI capabilities from enterprise offices into physical commercial real estate, lobbies, common areas, health care facilities, retail spaces and mixed-use properties. The verticals we're tackling together include enterprise office, health care, retail and these mixed-use properties. Each of these represents a significant expansion of our addressable market. What makes this partner compelling is the math. TouchSource already has 11,000-plus deployed screens. We're providing the AI intelligence layer that makes those screens dramatically more valuable. This is a capital-efficient growth channel. And as you recall from me we also have a product, the CXAI Kiosk that we're selling into our enterprise clients, the large clients, and all of them are wanting to have the ability to scale that and knowing that we're the software layer, TouchSource already has those kiosk capabilities in different form factors with the hardware sizes and with the different media players. So it's a really great partnership, and we hope to sell both ways, meaning that we're enabling the Agentic AI Orchestration layer to those kiosks, and vice versa, we're also partnering with them to deploy their kiosks in our enterprise environment where every single floor needs a multiple of them. So there's a huge expansion opportunity. The teams are working very closely. We're going to start giving you updates from this partnership, but this is really a very interesting model for us and it allows us to go beyond the indoor campus environments that we've been in, but to get to a larger piece of the puzzle. And with the CORTEX BOND-based Agentic AI platform, this is going to be much, much simpler and easier for us to do than what we'll be doing for our enterprise clients. All right. So let me just bring it all together in terms of a summary of what we just shared with you. When you think of the bigger picture, the product market fit is confirmed now. Fortune 500 enterprises requirements now match CXAI's capabilities precisely. AI and Agentic AI moved from optional to mandatory in procurement. So no longer it is like, oh, maybe we'll check this out. It is becoming the right standard, and it is becoming critical. So anybody who doesn't have it is not going to be part of these discussions. And this is where, like I said at the start, we see ourselves really ahead of the competition in our space and even the big guys that are playing the space do not have the capability that we have. Secondly, our addressable market exceeds $100 billion, spanning digital workplace platforms is $77 billion with a 20% CAGR and AI assistance at $3.35 billion, going to $21 billion at a 45% plus CAGR. And the timing could not be better. 40% of enterprise after adding AI agents in 2026, that is from Gartner, they're really on top of it and they feel like this is where every app has to go. And the enterprise software spending is also increasing north of 15% year-over-year. And hybrid work is permanent now. It's no longer a transition. It is -- there is going to be there and the platform consolidation is accelerating. So in a nutshell, 2025 reset is complete. 2026 is about scaling the platform and capturing the opportunity. While we believe CXAI is positioned at the center of Agentic AI, enterprise workflows and physical space in thousands and we're excited about what's ahead. Our foundation is stronger than it has ever been. We have a differentiated AI platform, and we are entering the next phase of growth. This is the right company in the right market at the right time. Okay. Let me go to some Q&A. Joy, do you want to check if there are any questions from the audience? Joy Mbanugo: Yes. Absolutely. I think we have a good handful of questions. I think I'll start with questions around our stock because there seem to be quite a few. There's 1 on are you in danger of being delisted and the second 1 related to the stock is, what is your time line on becoming compliant and what is the action plan? And I'll take the first part of it, Khurram, if you want to take the second part. So first, we did receive a delisting notice from NASDAQ, but we received an extension and we have until September, and we do plan on being compliant before September and there are multiple ways we can get there, but we believe we'll get there through growth. Khurram, do you want to add anything? Khurram Sheikh: Absolutely. Look, we are very focused on that. When NASDAQ gave us extension, they understood that we have met all the requirements for listing, except the bid price, so all the other requirements are met in terms of shareholder equity, in terms of market cap, in terms of other requirements that NASDAQ has. The only requirement is the bid price. And we believe that given that we are severely undervalued and we believe that with the results we're going to be demonstrating to the market in the coming months and the momentum we have with our wins as well as our Agentic AI platform, we believe that we can meet that level. And then we also have mitigating factors. So we will be confined much before our September date. That is our goal, and our Board is fully committed to that. Joy Mbanugo: Okay. Next question. What can investors look forward to from the company in the near future? I'll take the first part of it again. And Khurram, if you want to take the second part. From a growth standpoint, like we mentioned, we're not giving specific guidance, but directionally, we expect to grow in the double digits, and we're already seeing great momentum with landing new customers and new logos for 2026. Khurram Sheikh: No, absolutely. And we made the press release, I think, in Q4, we had 5 large clients renew in the fourth quarter. All those clients are also expanding with the Agentic AI this year. And as Joy mentioned, we've got the 20 plus in the pipeline. We believe we're closing deals. There are things in contract right now. They're in contract with us right now, and there are other deals coming our way. So we're pretty excited about moving them from pilots and initial discussions to now contracts and hopefully scale deployments in 2026. So it's a pretty exciting time at the company, and our team is fully focused on executing those contracts and making sure they deliver. And I think if we deliver even a small percent of those, we're going to hit the double-digit number. So I think we believe that, that is very realistic. And we believe there will be more happening hopefully, in the coming weeks and months as these customers go from their pilots to their first appointment. Joy Mbanugo: Next question, and Khurram I'll have to punt this over to you. How do you plan on setting yourself apart from other AI companies? Khurram Sheikh: That's a great question. And in our space, if you look at our landscape, there's a lot of companies that have been around for a while in the new space management and other space. And that market is getting commoditized, and those companies are really at a very low margin. Secondly, you see people that have built apps. As you see, the SaaS model is on the threat. And so when you think about Agentic AI, there are only a handful of companies that actually can do it. I think the large AI companies are focused on horizontal solutions. We believe we are a vertically integrated solution that is really tied to campus environment, campus intelligence, intelligent AI system inside buildings. And that's where we have the big moat. And our BOND and CORTEX are designed to provide the same level of Agentic interface that you see in the horizontal apps, but in a more burdening integration -- integrated way with the security and privacy that are needed by our clients. And as a reminder, all our clients -- most of our clients are large financial guys, they are not going to -- they don't compromise on security and privacy. So I think that is a core part of our offering and core part our IP. And that sets us apart, right? So when I look at the competition, I think it's more about -- naturally competition is good, but I feel like we've got a significant advantage of others. And even when winning these RFPs, we have very large companies competing with us that don't have the depth of the capability that is required by the client. So I think that is my focus is really that differentiation. And you will see more and more filings on the patents as we move forward as we started implementing these solutions. But it's going to be a competitive space for sure, but it's going to be a much growing space because now these clients are looking at full transformation across the whole enterprise. They're not looking at just the space booking function or the desk booking function. They're looking at everything they do inside the enterprise and in a hybrid fashion. And we provide that solution today, and we're going to grow that capability over time. Joy Mbanugo: Okay. And the last 2 questions are sort of related on deal size and revenue growth. So I'll ask the longer one. Can you contextualize the double-digit growth target relative to 20-plus customer pipeline? How much conversion that would imply how much is new customers versus expected expansion? Was there a total of 5 major customer renewals in 2025, more or less. And for renewal contracts, how much do you see ARR increasing on average? I'll take some of this, Khurram, if you want to take the second half. So there are more than 5 renewals in 2025. How much is new versus expected expansions, I think we expect more growth on the new logo side just because we haven't seen it, but I think healthy on the expected expansion. And then renewal contracts, how much do you see ARR increasing? Hard to tell right now we have large renewals to happen in Q1 and then more throughout the year. So I don't have that exact figure at the moment. Khurram, if you want to take the double-digit growth relative to the 20-plus customer pipeline, do you want to take that? Khurram Sheikh: Yes, absolutely. So as Joy said, we don't just have -- 5 customers renewed in Q4. We've had many more renewals than that. I think on the deal size and the -- it depends on clients. A lot of our clients start with a couple of hundred thousand and then go to higher. And so think of that as the baseline. But a lot of our clients, as you know, are in this -- they're doing this a strategic move. This is through RFPs and a lot of diligence. So from their perspective, this is a multimillion dollar opportunity or multimillion dollar total value for contract, but it's over a number of years. So we believe the starting point is there, but they're making long-term decisions. They're doing -- these deals are 3-year deals. They are 3-year commitments, okay? So they're not just a single year. Let's see what happens. These folks are really wanting to do multiyear deals. So I think that's the exciting part. But on deal size, yes, it depends on the client. If a client has 100-plus campuses, you can imagine that's going to be much larger than somebody who has 10. But the interesting piece I would tell you is, and this goes back to our product capability and others, there's a client that has around 10,000 employees, not the 50,000, 100,000, but they also do around 10,000 events, and they're super excited about our Agentic AI event module because they want to now create events on demand and have all these different events. So from that customer, you would have -- you could -- potentially even have more revenue just from the events module than the employee engagement modules. So there's a lot of opportunity in the growth of these businesses because Agentic AI is going across all their different functions, whether it's space management, whether it's event management, whether it's food ordering. So we see this as even a bigger opportunity. But again, we're starting off on a good piece. And now we just need to make sure that we can execute and deliver and get these customers onboarded as soon as possible. But I see a very bright future for Agentic AI across different dimensions of our space. Joy Mbanugo: That was the last question. Khurram Sheikh: Okay. Great. Well, thank you, everybody, for joining our call. Joy and I are super excited to be hosting you today. We will look forward to future discussions. We are going to have our Q1 earnings call coming up, we're going to have our Annual Shareholder Meeting. We're going to be super proactive out there. We were a little bit under the cover because of the 10-K had to be filed and with the IP and patents. Now that we file those 10-Ks available, you can go read it. The patent has been issued. We're going to be super vocal in the market, and we look forward to sharing with you the positive news on our upcoming deployments, and we look forward to hosting the next earnings call in the next, I think, 30 to 45 days, but we'll keep you posted. Thank you, everybody.
Operator: Good afternoon, everyone, and thank you for participating on today's Fourth Quarter and Full year 2025 Earnings Conference Call and Webcast for Barfresh Food Group. Joining us today is Barfresh Food Group's Founder and CEO, Riccardo Delle Coste; and Barfresh Food Group's CFO, Lisa Roger. Following prepared remarks, we will open the call for your questions. The discussion today will include forward-looking statements. Except for historical information herein, matters set forth on this call are forward-looking within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about the company's commercial progress, success of its strategic relationships and projections of future financial performance. These forward-looking statements are identified by the use of words such as grow, expand, anticipate, intend, estimate, believe, expect, plan, should, hypothetical, potential, forecast and project, continue, could, may, predict and will and variations of such words and similar expressions are intended to identify such forward-looking statements. All statements other than the statements of historical fact that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors that the company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond control of the company. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those indicated by such forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of date they are made. The contents of this call should be considered in conjunction with the company's recent filings with the Securities and Exchange Commission, including its annual report on Form 10-K and the quarterly reports on Form 10-Q and current reports on Form 8-K, including any warnings, risk factors and cautionary statements contained therein. Furthermore, the company expressly disclaims any current intention to update publicly any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions or otherwise. In order to aid in understanding of the company's business performance, the company is also presenting certain non-GAAP measures, including adjusted gross profit, EBITDA, adjusted EBITDA, which are reconciled in the tables and business update release to the most comparable GAAP measures and certain calculations based on its results, including gross margin and adjusted gross margin. The reconciling items are nonoperational or noncash costs, including stock compensation and other nonrecurring costs, such as those associated with the product withdrawal, the related dispute, certain manufacturing relocation costs and acquisition-related expenses. Management believes that the adjusted gross profit, EBITDA and adjusted EBITDA provide useful information to the investors, because they are directly reflective of the performance of the company. Now with that, I will turn the call over to the CEO of Barfresh Food Group, Mr. Riccardo Delle Coste. Please, sir, go ahead. Riccardo Delle Coste: Good afternoon, everyone, and thank you for joining us for our fourth quarter and full year 2025 earnings call. I'm very excited to report that 2025 has been a transformational year for Barfresh. One that has fundamentally repositioned our company for sustainable growth and profitability. The fourth quarter capped off an exciting year, in which we achieved record revenue of $14.2 million, completed a strategic acquisition that gives us control of our own manufacturing capabilities and secured financing that positions us to unlock over $200 million in revenue capacity. Before I discuss our quarterly and full year results, let me provide context on the strategic milestones that have reshaped our business model. In early October, we completed the acquisition of Arps Dairy, which has fundamentally changed how we operate. This acquisition brought us an operational 15,000 square foot processing facility where we immediately commenced production, along with a 44,000 square foot state-of-the-art manufacturing facility in Defiance, Ohio. We're already realizing immediate benefits from enhanced supply chain control and operational efficiency with approximately 90% of our revenue mix now manufactured in-house, giving us the ability to deliver orders that we previously would not have been able to deliver without the acquisition. After years of being constrained by third-party manufacturers, which created operational challenges, revenue limitations and increased operating costs, we now have control over the majority of our production. Our updated time line for the remaining construction and equipment installation at our larger facility is extended to the fourth quarter of 2026 due to the timing of financing. In March of 2026, we secured a $7.5 million senior convertible note financing that delivers transformative benefits. These proceeds enable us to pay off the existing mortgage on the larger Defiance facility, meaning we now own our manufacturing plant, free and clear. The financing also accelerates construction completion, enabling us to move into the enhanced facility before the end of 2026. Additionally, as previously announced, we would approve for a $2.4 million government grant to install specialized equipment necessary for full-scale production operations. For the fourth quarter of 2025, we achieved record revenue of $5.4 million, representing a 94% year-over-year revenue growth. For the full year of 2025, we achieved record revenue of $14.2 million, representing a 33% year-over-year growth. The fourth quarter and full year revenue growth was driven by the inclusion of the newly acquired Arps Dairy. Growth in our base business for 2025 was limited by the supply constraints of our co-manufacturing model underscoring the strategic necessity of acquiring Arps Dairy. With the limited manufacturing supply we have been focused on maintaining results and working on recovering lost customers, but now as we move into 2026 with enhanced capacity coming online, we are also focused on acquiring new ones. We've seen strong uptake across our existing Twist & Go portfolio and our Pop & Go 100% juice freeze pops have gained meaningful traction with several large school districts. I'm particularly excited to highlight a significant win we announced recently that demonstrates our continued momentum and competitive strength in the education channel. We successfully secured a 7-year bid award, with the largest school district in Nevada, representing the fifth-largest school district in the entire United States. This district serves over 300,000 students across the region, making it one of the most substantial wins in the K-12 channel. This win is especially meaningful for several reasons. First, it validates our ability to compete successfully for and secure placements, with the largest school districts in the country. And second, with our enhanced manufacturing capabilities through the Arps Dairy acquisition and our expanded product lineup, we are well positioned to support this district's needs reliably and consistently. This represents a major milestone in our expansion within the K-12 education channel and strengthens our position as we continue pursuing similar large-scale opportunities nationwide. Despite wins like this fifth largest district in the nation, we remain at only approximately 5% market penetration in the education channel overall, which represents substantial runway for growth. And we have tremendous growth opportunities within the districts we currently serve. A key priority throughout the fourth quarter and into fiscal 2026 has been protecting our base business and rebuilding relationships with customers who are impacted by the supply constraints we experienced earlier in the year. We successfully brought back customers who had temporarily removed our products due to our earlier supply shortfalls with many reintroductions occurring in the fourth quarter. Our approach has been straightforward and relationship-focused. We've stayed in close contact with these school districts through our broader broker network and our own sales team, communicating transparently about our manufacturing progress and our transition to owned facilities. Because these customers are already familiar with our products and have seen the positive response from students, the reintroduction process is more streamlined. This focused effort to win back displaced customers while simultaneously pursuing new district opportunities, positions us well for sustained growth as we're both recovering lost ground and expanding our market presence. The manufacturing capacity issues that constrained our first half performance were mostly resolved by year-end with the acquisition of Arps Dairy's processing plant and the contribution from our smoothie bottle co-manufacturing partners, which provided additional production capacity, giving both existing and prospective customers confidence in our ability to deliver reliably. The combination of record fiscal 2025 revenue, successful school district penetration, including major wins like the fifth largest school district in the nation, and our expanding manufacturing capabilities positions us well as we execute on our fiscal 2026 plan. We've built significant operational momentum, and with our owned facility, providing enhanced control and capacity, we're ready to capitalize on the substantial market opportunities ahead. With that overview of our strategic progress and market momentum I'll now turn it over to Lisa to walk through the detailed financial results for the fourth quarter and full year. Lisa Roger: Thank you, Riccardo. Let me walk you through our fourth quarter and full year financial results in detail. Revenue for the fourth quarter of 2025 increased to $5.4 million, representing our highest quarterly revenue in company history. Revenue for the full year of 2025 was a record $14.2 million compared to $10.7 million in the same period of 2024. This growth was driven by our Arps Dairy acquisition, which contributed $2.9 million. Gross margin in the fourth quarter of 2025 was 3% compared to 26% for the fourth quarter of 2024. Adjusted gross margin for the fourth quarter of 2025 was 4%, compared to 30% in the prior year period. Adjusted gross margin for the full year of 2025 was 22% compared to 37% for the full year of 2024. The decrease in gross margin resulted from transitioning Barfresh production to the company's new facility to capture long-term operational efficiencies and scale benefits, which involves typical startup and implementation costs that temporarily impacted margins. Additionally, we continued Arps Dairy's existing milk processing business, which operates at different margin profiles than our core business and can experience commodity pricing fluctuations that may impact revenue, but provide stable milk supply and support production and diversification. These are strategic investments in our long-term growth and opportunities. We expect incremental margin recovery to occur throughout the year and accelerating in the second half of 2026 when the equipment enhancements are completed and the new facility is commissioned. Net loss for the fourth quarter of 2025 improved to $763,000 compared to a net loss of $852,000 in the fourth quarter of 2024. Net loss for the full year of 2025 was $2.7 million compared to a net loss of $2.8 million in the prior year period. Selling, marketing and distribution expenses were $783,000 compared to $872,000 in the fourth quarter of 2024. Selling, marketing and distribution expenses for the full year of 2025 were $3.2 million compared to $3.1 million in the same period of 2024. G&A expenses for the fourth quarter of 2025 were $922,000 compared to $607,000 in the same period last year. G&A expenses for the full year of 2025 were $3.2 million compared to $3 million in the same period of 2024. Adjusted EBITDA for the fourth quarter was a loss of approximately $1.1 million compared to a loss of approximately $563,000 in the prior year period. For the full year of 2025, our adjusted EBITDA was a loss of approximately $2.1 million compared to a loss of $1.3 million in the same period of 2024. We expect to achieve positive adjusted EBITDA in fiscal year 2026 as we realize the full benefits of our integrated manufacturing model and complete our facility optimization. Turning to our balance sheet. As of December 31, 2025, we had approximately $2.3 million of cash and accounts receivable and approximately $1.7 million of inventory on our balance sheet. In March 2026, we secured a subscriptions for a $7.5 million senior convertible note financing. The proceeds were used to pay off the existing mortgage on our manufacturing facility in Defiance, Ohio, as well as other obligations and will accelerate construction completion, which will position the company to control its manufacturing destiny with significantly expanded production capacity. In addition, as previously announced, we were recently approved for a $2.4 million government grant to purchase and install specialized equipment necessary for full-scale production operations. The financing structure gives us significant financial flexibility. The ability to pay in either cash or registered stock preserves cash for operational needs during the construction phase and owning the facility free and clear, positions us to access additional capital through mortgage and equipment financing as may be required for any remaining investments. Now I will turn the call back to Riccardo for closing remarks. Riccardo Delle Coste: Thank you, Lisa. As I reflect on 2025, this year represents an inflection point for Barfresh. We delivered record revenue of $14.2 million and fundamentally repositioned this company for unprecedented growth. The strategic decision we made this year acquiring Arps Dairy and securing the financing to facilitate the completion of construction on our new state-of-the-art facility mean we are no longer constrained by third-party manufacturers or limited production capabilities. We now control our own destiny. Looking ahead, we have multiple powerful drivers of growth working in our favor. First, our own manufacturing capabilities through Arps Dairy give us direct control over production, enhanced operational efficiency and the flexibility to innovate and scale new products more rapidly. Second, once our facility expansion is complete, we will have capacity to support over $200 million in annual revenues, a significant leap in our production capabilities. The new equipment and optimized facility layout will create greater operational efficiencies, increase profit margins and provide the scalability to support aggressive growth plans. Third, we're still in the early innings of penetrating our core education channel with massive runway ahead of us. Our recent school district wins demonstrate that we're gaining traction and rebuilding momentum. Fourth, Beyond our core product lines, the expanded facility opens significant opportunities for manufacturing, both for new products owned by Barfresh and co-manufacturing for third parties, creating additional revenue streams that leverage our state-of-the-art capabilities. Now turning to our fiscal 2026 outlook. As we advance our initiatives for the year, we are making thoughtful progress on the integration and optimization of our 44,000 square foot facility. While the implementation is taking slightly longer than initially anticipated, the new equipment and optimized facility layout will create greater operational efficiencies, increase profit margins and provide the scalability to support our growth plans once fully operational. Given our updated facility and equipment time line, we are adjusting our fiscal 2026 revenue guidance to a range of $28 million to $32 million, and our adjusted EBITDA guidance to a range of $3.2 million to $3.8 million. While this represents a more conservative ramp-up schedule than our initial projections, it still reflects substantial year-over-year growth of 97% to 125% on revenue from both the full year inclusion of Arps Dairy's revenue and growth of legacy Barfresh products. We remain confident in the transformational nature of the platform we are building and believe fiscal 2026 will represent a pivotal year that demonstrates the power and scalability of our integrated model. For the first quarter of fiscal 2026, we expect revenue in the range of $5 million to $5.2 million and to be adjusted EBITDA breakeven, which is also impacted by our updated equipment time line. As we progress through the year and complete our facility enhancements, we expect year-over-year quarterly improvement in both revenue and profitability. We are building a scalable, profitable business model that positions us to capitalize on significant market opportunities while delivering sustainable long-term value creation for our shareholders. The integrated manufacturing model we're building will enable us to pursue opportunities with improved economics and operational control that simply weren't possible before. The operational momentum we demonstrated in 2025, combined with owning our own manufacturing facility and dramatically expanding our capacity positions Barfresh for what we expect to be exceptional growth beyond fiscal year 2026. We look forward to updating you on our progress as we move through 2026 and demonstrate the full potential of what we've built. And with that, I would like to open up the line for questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Thomas McGovern with Maxim Group. Thomas McGovern: First one, just as we're gaining additional clarity on the supply chain ramp here and the initiatives that are underway to kind of stabilize everything after some of the shakiness we've seen in the past. I'm just curious how the conversations have gone with -- in terms of reengaging the school districts that you might have lost due to some supply chain disruptions in the past. Just maybe unpack that for me. And then my second question relates specifically to your guidance, right? If we look at that, we're clearly expecting some growth in the back half of the year. Maybe walk me through what you're expecting in terms of timing? And then kind of what some of the underlying assumptions for that full year guidance is, is that based on essentially just your base business, including conversations that have kind of come to fruition? Or does that assume that certain relationships or contracts that are up in the air will be signed as we're entering maybe the new school year for '26, '27? Riccardo Delle Coste: Yes, sure. Thomas, so the customers that we're talking with and have been constantly engaged with love the product. we're really just now focused on keeping that communication up. We're reaching out to customers that have taken off the product due to no supply. We're going through the bidding process again. A lot of the customers are just waiting for us to have product come back into distribution in certain markets or their bid to come back around with their distribution partners. The fortunate part is that we're in the bidding cycle again now. So we're having added again to customers, and we're getting new ones as well. So we're in a very fortunate position that we've got some great customers that love our product, and they want to keep using it and the kids love the product. And as we're now getting product back out into the market in different parts of the country, we're just staying in close contact with them and working towards whatever obstacles they may have from a timing perspective in their own establishments. Does that make sense? Thomas McGovern: Yes, absolutely. And then just kind of maybe walk me through some of the underlying assumptions for the revenue -- the implied revenue growth in the back half or quarters 2 through 4? Riccardo Delle Coste: Yes. So the implied revenue obviously includes both the Barfresh business and the Arps business going forward. We would typically have a more severe drop off with Barfresh products in the second quarter, for example. With the Arps business, we actually have the addition of the ice cream mix, which is quiet in the winter months. So it's actually quite counter seasonal to the rest of our business. And then in the -- so in the second quarter, we'll have a higher than expected for our products revenue. And then in Q3, you'll have the addition of still of the ice cream mix-type products together with the Barfresh products as well, which is our biggest -- typically our biggest quarter. So the growth is coming by the combination of the 2 businesses, based on the base business that we have as well as some foresight with some of the new accounts and bids that we're winning. Thomas McGovern: Understood. And then just one more question for me. I mean, especially as you guys are kind of diversifying your seasonality, if you will, or with your product portfolio, you should expect some counterweight there, which is great. Just also curious, I know it's not as large of a component of revenue now, but as we look at channels outside of education, in the past, we've talked about foodservice and military as potential growth channels for you guys. Is there any updates on that front? And can you talk maybe a little bit about strategy and how innovation or new product launches might play a role in expanding your presence in those channels? Riccardo Delle Coste: Yes. I mean there are so many opportunities in terms of different channels for us to focus on. I mean, we've got a huge market that we're only in a 4% to 5% market penetration of in the education channel. And we haven't even been able to keep up with supply up until now in that channel alone. So we do feel that there's an enormous amount of opportunities in other channels, whether it's food service, whether it's even retail, petrol and convenience, we just haven't had the supply to get there. So we have been in this -- protect our base business mode for the last couple of years. Now that we have the manufacturing capacity, and we're in control of that we're now going to be getting back into aggressive sales mode. And that aggressive sales mode is going to be exploring the various channels out there and how we can best exploit these opportunities. Operator: [Operator Instructions] And our next question comes from [indiscernible]. Unknown Analyst: Congratulations, Riccardo and Lisa, on the record Q4 and this acquisition. I think, it has definitely changed the story where last year, the company was supply constrained. But I think at this juncture, the company -- the business just controls its own destiny. So it's really a great move. I have 2 questions. One is in terms of the production capacity, I think it was mentioned on the press release that with this new enhancements to the facility done, where it will -- basically, you'll have a capacity to support about $200 million in revenue at some point. Can you share on what's the production capacity that you have at the moment? And how does it scale? When do you get to that point? That's number one. And then number 2 is in terms of the guidance, 28% to 32%, very strong guidance. And as you mentioned, that includes the base business and the Arps business. From the base business side, does the guidance include the business that you already have signed up? And is there an upside to as you go in the school season and sign more school districts? Riccardo Delle Coste: Yes. So let me start with the first question on the capacity, and we'll circle back to the second one. The existing facility is an older facility. We're operating in there, and we're able to service to get what we need, and that will see us through up until we get to the new facility. It's not ideal, but it's working, and we're able to get product out that had we not done the acquisition, we would not have been able to supply customers. That's how important this acquisition actually was for us. When we get into the new facility, which will be later this year, the infrastructure will all be there. The base infrastructure for the processing will also be there. So it's really going to be a matter of as we ramp up and want to do more things, whether it's more products, we'll have additional capacity on our existing lines, plus room to install new lines. So we're going to have a lot more flexibility in how we grow the business, and where those revenues come from. That's why this is such an important acquisition for us because not only is it going to be instrumental in growing our base business and our base product portfolio, but it's also going to give us an enormous amount of opportunities in the future. As we look at the revenue in the base business, we're looking at 2026 as a stabilizing year for the business. And that includes the customers that we have both in the Barfresh business and the Arps business, a little bit of growth in terms of being able to acquire and get back to some of these customers that we've lost and really setting us up for a very exciting 2027, especially once the new facility is done, and we get a really significant jump in efficiencies to the bottom line. Unknown Analyst: Got it. Got it. And then one more on the recent signing of this Nevada large school district. I mean, for a 7-year deal, I mean, that's also I think it's -- from an outside, I mean, it just looks like -- I mean, the business, and you have so much confidence to supply the product to sign such a long-term deal. And in the past, I mean, Barfresh has been able to sign similar kind of deals like with Los Angeles School District at some point, but I think you guys were supply constrained. Anything you can share on what the pipeline really looks like? I mean, does this just changes where you are not really just going after like smaller school districts, is not where you just intend to go after larger school districts and you have the confidence to be able to? Riccardo Delle Coste: We will. We will. We really are focused on just making sure that we get out of the old facility into the new facility. So that we start talking to those larger accounts and really starting to build that pipeline and being able to go after the business aggressively. And that's just something that we couldn't do before because we couldn't supply. Unknown Analyst: Okay. And on that facility upgrade, what is the time line? I think you said end of 2026. Riccardo Delle Coste: It will be before the end of the year. Operator: [Operator Instructions] All right. And it looks like there are no further questions at this time. So with that, I would like to thank everyone for their participation, and this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful rest of your day.
Operator: Good day, and welcome to the Bitfarms Fiscal 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded. I would like to turn the call over to Jennifer Drew-Bear from Bitfarms Investor Relations. Please go ahead. Jennifer Drew-Bear: Thank you, and welcome to Bitfarms Fiscal Year 2025 Conference Call. With me on the call today are Ben Gagnon, Chief Executive Officer and Director; and Jonathan Mir, Chief Financial Officer. Before we begin, please note this call is being webcast with an accompanying slide presentation. Today's press release and our presentation can be accessed on our website under the Investors section. Turning to Slide 2. I'd like to remind everyone that certain forward-looking statements will be made during the call, and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties. And I invite you to consult Bitfarms 10-K for a complete list. Also, please note that references will be made to certain non-GAAP financial measures, and therefore, may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our 10-K for definitions of the aforementioned non-GAAP measures and their reconciliations to GAAP measures. Please note that all financial references are denominated in U.S. dollars, unless always noted. And now turning to Slide 3. It is my pleasure to turn over the call to Ben Gagnon, Director and Chief Executive Officer. Ben, the floor is yours. Ben Gagnon: Good morning, everyone, and welcome to our fiscal year 2025 earnings call. In 2025, we made a bold decision to walk away from our legacy business, Bitcoin, and build the infrastructure in North America for what comes next, HPC and AI. It was a year of deliberate and consequential transformation with a clear mandate. Secure North American pipeline, strengthen our balance sheet, accelerate site development, and position ourselves to engage customers from a place of operational momentum at the peak of the energy bottleneck constraining the growth of AI. I can say with confidence and pride that we accomplished exactly what we set out to do. The foundation you see today, the capital structure, the sites, the team, the strategy was engineered through deliberate choices, developed with discipline and built to propel us forward. We made foundational changes to reposition the business and made 100% of our focus on North American HPC infrastructure development. No half measures, no compromises and in time, no Bitcoin. We built a new company. And while we are presenting as Bitfarms today, tomorrow marks our beginning as Keel infrastructure. The name says it all. A Keel is the bottom of structural component of a vessel. It's what keeps it stable and moving forward in the right direction regardless of the condition above the water line. It is structural, it is essential, and it is exactly how we see our role in the HPC and infrastructure landscape. We are not here to compete with hyperscalers or neoclouds. We are here to enable them. Our focus is providing the critical and largely invisible foundation that will allow the world's most advanced AI platform to deploy on time and scale without interruption. We expect to close the re-domiciliation and finalize our rebranding efforts tomorrow, April 1, and we'll begin trading under the ticker KEEL, 2 business days after completion of the transaction on the Nasdaq and the TSX. We are entering this new phase from a position of strength. With over 2 gigawatts in our pipeline, Keel is a regional leader with some of the largest power land portfolios in some of the highest demand markets in North America and with robust financial strength to execute against our plan. Our current liquidity is far in excess of the CapEx budgeted to get us through permitting and ultimately to start signing leases, giving the company significant financial flexibility to execute on our strategy. And our strategy is equally as clear. We are designing all of our site and campus developments as either powered shell or co-location facilities. We believe this is where we can deliver the most value to shareholders and serve our potential customers at the speed and to the specifications they need. We were originally exploring in parallel to co-location the potential benefits of pursuing a small amount of GPU as a service at our Washington site, Moses Lake, where due to the lowest cost power for data centers in the country and a relatively smaller footprint, we believe it could be an avenue to drive additional shareholder value. Since our last quarterly call, we have spoken with an increased volume of potential customers. And it's clear from those conversations, the most accretive business model for the site is one of co-location. This is not specific to Moses Lake and applies to all of our other sites as well, where demand is even higher. So we will focus on what we do best, being an infrastructure developer and owner. This plays directly to our core competencies. We are a team of developers united by disciplined action, building cost-effective institutional-grade infrastructure at the pace our customers require. The same capabilities have built our energy platform, speed to market, capital discipline, operational rigor precisely what HPC and AI deployments demand today. This is just the natural extension of what we do best. So with all the pieces in place and with the overwhelming support of our shareholders who voted over 99% in favor of the HPC and AI pivot, the U.S. redomicile and the rebrand. Starting tomorrow, we are Keel infrastructure. Turning to Slide 4. When we sat on our pivot, we developed a 3-year transformation plan, one that as of today, we are nearly halfway through completing. In 2025, we did the intensive foundational work for our transformation, including the Stronghold acquisition, securing more power in Pennsylvania, rebalancing the portfolio to North America, a $588 million raise fully institutional and oversubscribed, our U.S. GAAP transition, New York headquarters and establishing a new executive team. This work is done. With power and land secured in some of the power markets that matter most, a team of internal experts and strategic partners that have built data centers for the largest companies in the world and a balance sheet engineered to see us through 2026, we are well positioned to continue our site development and deliver against the time lines, our prospective hyperscalers and neocloud customers need. 2026 is all about execution. Effective tomorrow, we will have completed our redomiciliation to the United States and officially rebranded as Keel infrastructure. Two major milestones that position the company for the next phase of growth. With that complete, we expect the next significant milestones to come from executing against our development at Panther Creek, Sharon and Moses Lake, where we are moving full steam ahead and working diligently across three simultaneous and active work streams. One, finalizing permits, which we expect to be done in the coming months. Two, continued work on architecture and engineering in line with ongoing customer conversations and requirements. And of course, three, our go-to-market to secure highly financeable leases with investment-grade tenants. Commercialization is well underway. The upcoming milestones investors can expect are completion of preconstruction activities like permitting, progress in customer engagement and ultimately lease execution, which we are confident we can achieve this year and will be major catalysts. 2026 is also the year where we expect to leave Bitcoin and Bitcoin mining behind. While we were probably one of the first miners to commence wind down of our Bitcoin mining exposure to reinvest that capital into infrastructure for HPC and AI, we will be accelerating those efforts in 2026 as site developments progress. 2027 is all about delivery. This is the year when we anticipate that sites would come online, we'd begin delivering megawatts to customers, HPC and AI revenue really begins and we complete our transition to a premier North American HPC and AI infrastructure company. By the end of 2027, we expect Keel will be a proven infrastructure developer and a regional leader across Pennsylvania, Washington and Quebec, and we will just continue to grow and scale from there in 2028 and beyond to over 2 gigawatts as we execute against our expansion capacity. Turning to Slide 5. In HPC infrastructure, power, location and time lines are everything. We hold something scarce and valuable secured power, land and expansion capacity in Pennsylvania, Washington State and Quebec. Some of the most in-demand markets with some of the biggest barriers to entry. We know it and so do our potential tenants. Our campuses offer solutions to hyperscalers and neocloud's greatest scaling problems, location, proximity and fiber connectivity to major metro areas and data center clusters solving for latency issues and giving our tenants proximity to their own customers and other data centers. Time lines. Our robust secured power for '26, '27 and with expansion capacity in 2028 is highly coveted in an environment where energy capacity is hard to find and multiyear waitlists are the norms. We create value for tenants by enabling them to deploy years earlier by leasing from us rather than to invest in growing organically. An energy-efficient cool climate, the lower the PUE, the more critical megawatts. Panther Creek is a great example of seeing the hyperscaler and neocloud's appetite at play. While there is a lot of interest in the site last year, inbound customer activity surged after we secured zoning in February. This is not a coincidence. It is the proof point and one that we've been making for the last year, but may still be confusing to some investors. So we'd like to be clear that investment-grade tenants value derisk sites where they can move from lease to revenue fast. The more we advance, the better our leverage. The better our leverage, the better the leases, and the more long-term value we create for shareholders. Turning to Slide 6. It is indisputable that power is the binding constraint for AI infrastructure deployment and will remain so for the coming years. Leading investment banks, Goldman Sachs, JPMorgan, Wells Fargo, Guggenheim, Moelis, they've all published extensively on this. And the consensus is clear. New power generation cannot come online fast enough to meet AI demand today, tomorrow or in the next 5 years. This bottleneck is structural, not cyclical. Hyperscalers and neoclouds that used to plan on 12-month horizons are now locking in 24- to 36-month supply chain commitments. Not tied to specific projects, but as platform level agreements and are now actively competing for the power and land to deploy it. While you are probably familiar with this information, here you can see a summary of the five development sites. The power we have secured and in some cases, the incremental power opportunities that make up our 2.2 gigawatt pipeline. Turning to Slide 7. I want to take a moment to put our current valuation context because there is a meaningful disconnect between where we trade today and the value we are positioned to capture as a company. When we analyze our current valuation against our peers, the picture becomes clear, at approximately $1.9 million per available megawatt of secure 2027 capacity, we're trading in the middle of a Bitcoin miner Group, valued at roughly $1.7 million to $2.1 million for 2027 megawatt meaning we are being valued based on having power but not what we are doing with it. For shareholders and bondholders, we see three distinct catalysts, each capable of driving meaningful reratings. The first is obviously lease execution. Across our sector, companies that have signed leases trade at $4 million to $6 million per 27 megawatts, a 2 to 3x premium to where we are today. This is the market's consistent signal driven entirely by lease execution, not facility delivery, not revenue generation, just signed leases. A signed lease secures revenue and financing derisking the developments. The market pays for that with nearly 500 megawatts actively being commercialized today and visibility on permitting across Panther Creek, Sharon and Moses lake, this catalyst is well within reach. The second catalyst and arguably the most powerful for long-term holders is securing our expansion capacity. 2/3 of our 2.2 gigawatt portfolio or approximately 1.5 gigawatts is expansion capacity, which we believe the market is assigning little to no value. While securing these megawatts is a process that will take more time, we believe additional megawatts can be secured in the second half of 2026 requiring very little CapEx while representing significant embedded value as powered land even before a lease is signed or there is a shovel in the ground. The third catalyst is delivering in 2027. Once facilities are derisked through commissioning and begin generating revenue under long-term contracts, the development risk should drop dramatically and the operator valuation numbers become transformational yet again. We are not taking a leap of faith on technology, our ability to see our power or market demand. The tech is here. The power is secured, the sites are advancing, the inbound demand is real, but the market has not yet priced in is the transformation that happens when a developer becomes a counterparty when we move from site advancing to lease executing. This is the main opportunity ahead of us to accelerate permitting, execute leases, secure our expansion capacity and ultimately deliver to our customers. This is how we will create value for our shareholders and bondholders. Turning to Slide 8. Our execution plan is defined by six areas, each supporting our ability to deliver at the pace and scale our future customers require. First, we've secured our deep bench of talent by adding over 60 years of infrastructure and development in over 50 years of data center construction experience combined in just the past few months. People have delivered at scale for the most demanding customers in the world. Jonathan Mir joined as CFO, bringing 25 years of energy infrastructure strategy and project finance expertise. We have also added an SVP of construction and of power, a VP of HPC Operations and Head of permitting to oversee the execution of these critical functions. We've assembled the right team to execute on our vision. Second, we are engaging the right industry leaders as partners, T5, Turner Construction, Corgan, [ WWT ], Vertiv. These firms have built data centers for the world's largest hyperscalers not once but hundreds of times. When customers look at our project partners, which will be available on the new website when it launches tomorrow, they will see that we have also assembled the right partners to ensure better outcomes. Third, we have the capital required to bring our sites to market. As of March 27, 2026, our liquidity stands at $520 million in cash and Bitcoin, which we expect is much more than the CapEx budgeted to get us to a lease at Panther Creek, Sharon and Washington. Jonathan will go into more detail on our capital position and financing strategy shortly, but the headline is simple. We're well funded and can move fast. Fourth, a disciplined Bitcoin exit. It is clear we are no longer a Bitcoin miner. However, with strong, robust liquidity, we can have a disciplined approach to our exit strategy. We will continue to operate up until the time sites need to be prepared for construction maximizing free cash flow before selling the miners. We will also opportunistically sell Bitcoin into strength to capture and reinvest every dollar we can into HPC and AI infrastructure. Fifth, power assets that cannot be replicated. Our megawatts sit in regions with large barriers to entry, Pennsylvania, Washington State and Quebec, all have multiple year waitlists. No one is cutting the line. Our 350 megawatts at Panther Creek, 110 megawatts at Sharon and 18 megawatts in Washington were secured before the AI demand wave made these markets highly coveted. This isn't power others can easily replicate giving us competitive edge with high-quality tenants to understand these markets and are hungry for assets like ours, which leads us to our sixth point. In this market, speed to power is what drives value. For our customers, the opportunity cost of delayed deployment is huge. So the priority is getting capacity online as quickly as possible. Every day of delay is lost revenue. As a result, power availability and certainty of delivery are the primary drivers of lease economics. This dynamic has pushed lease rates higher since our Q3 call, exactly as we said it would. The opportunity in front of Keel infrastructure is real. We now have the assets and the team is ready. I'm so proud of what we built in 2025, and I'm confident in what we'll deliver in 2026 and 2027. With that, I'll turn the call over to Jonathan. Jonathan Mir: Thanks, Ben. Turning to Slide 9. I joined the team 5 months ago. My focus has been on sharpening our approach to capital allocation, strengthening our balance sheet and capital structure and ensuring the financing actions support long-term shareholder value creation. I've had a front row of the depth of talent, the operational discipline and the strategic momentum across Bitfarms. I work closely with our operations and development teams both to understand the current trajectory of our assets and to ensure our capital plans are aligned with the opportunities ahead. What stood out to me is the extraordinary potential we have driven by the quality and potential of our sites, a strong balance sheet, the best liquidity position in the company's history and a broad team that's both deeply engaged and committed to excellence. We're moving quickly and with purpose. I'm pleased to be here with you today and discuss the progress we're making. I'll use this time to walk through our performance for fiscal year 2025 and outline our current capital strategy that we believe supports the accretive growth we're targeting for 2026 and beyond. Turning to Slide 10. Before discussing our financials for the quarter, I want to briefly frame the results are presented this quarter. As of Q3 2025, the Paso Pe facility in Paraguay has been classified as held for sale. As a result, all revenues, operating costs and asset balances associated with Paso Pe are treated as discontinued operations in our fiscal year 2025 financials. So when I refer to continuing operations, I am speaking exclusively about our North American platform, the foundation of our transition into HPC and AI infrastructure. With that, revenue for fiscal year 2025 was $229 million, up 72% year-over-year. Operating loss for fiscal year 2025 was $150 million including noncash depreciation of $98 million and $28 million of impairment charges. This compares to an operating loss of $28 million in 2024, which included $102 million of noncash depreciation and $4 million of impairment charges. Net loss for 2025 was $209 million or a $0.38 loss per basic and diluted share compared to a 2024 net loss of $7 million or $0.02 loss per basic and diluted share. The differences between 2024 and 2025 were driven by a number of factors, including change in fair market value of digital assets, primarily due to the decline of Bitcoin prices and realization of gains on disposal of Bitcoin during the year. Two additional items also impacted year-over-year comparability. First, we saw a loss of $68 million, reflecting changes in our derivative assets and liabilities. Second, 2025 impairment charges were $25 million higher than in 2024. For the year, our adjusted EBITDA was $29 million compared to $31 million in 2024. Turning to Slide 11. 2025 was a deliberate year of balance sheet optimization and improvement, providing the foundation for our next phase of growth. We successfully issued an oversubscribed $588 million convertible offering, significantly expanding our liquidity. And in February, we repaid the Macquarie debt facility eliminating legacy debt, simplifying our capital structure and freeing the company from covenants. Each of these supports the pursuit of our HPC infrastructure strategy. The Macquarie facility had been originally used to accelerate development at Panther Creek, funding critical project activities, including long lead time item procurement and substation work. Retiring the facility was a strategic decision, strengthens the balance sheet and gives us the flexibility to secure a more cost-effective financing at either the parent or project level. Our current cash position of $520 million provides the runway to advance Panther Creek, Sharon and Moses Lake through lease execution without accessing capital markets. Though we may do so if attractive opportunities arise that improve our ability to deliver the best possible long-term risk-adjusted shareholder returns. Macquarie was an excellent partner, and we appreciate their support so early in our pivot to HPC AI infrastructure. Turning to Slide 12. As we pivot to commercialization of our development sites, we have a clear financial strategy based on three principles. Capital allocation, capital formation and capital structure. Taken together, they are designed to deliver the best possible long-term risk-adjusted shareholder returns. First, capital allocation. We deploy capital into projects where the earnings potential exceeds their weighted average cost of capital. We rotate capital from businesses that are noncore or earning less than optimal returns and deploy the capital into higher return investments. Second, capital formation. Our financing strategy is designed to fund our very large growth opportunities while maintaining the liquidity needed for a stable base of operations. We will be opportunistic in our financing execution. We will fund construction of our data center projects using project or parent level bet and project or parent level equity or equity-linked offerings. We're taking a disciplined approach and at this time, are well capitalized to actively commercialize and execute leases across Panther Creek, Sharon and Washington. Third, capital structure. Our capital structure is designed to capture the best possible long-term risk-adjusted shareholder returns while also retaining overall corporate flexibility and support growth. Our objective is to operate with a deliberate liquidity strategy in order to enable clear-headed commercial decisions and capital allocation decisions rather than having liquidity drive time lines. Stepping back, our road map is clear. We are building a regionally focused high-growth HPC AI infrastructure platform, grounded in disciplined capital allocation, a strengthened balance sheet and a development cadence that maximizes returns and minimizes risk. We're funded through the key derisking stages, permitting and leasing across Moses Lake, Sharon and Panther Creek and we're entering 2026 with momentum, optionality and a balance sheet engineered for growth. We have the right people, assets, liquidity and strategy and we're well positioned to capture for our shareholders the long-term value potential we have today. With that, I'd like to return the call to Ben for closing remarks. Ben Gagnon: Thanks, Jonathan. A little over a year ago, as our team began actively integrating AI into both our business and our daily lives, we came to a realization. This isn't just another technology cycle. It's a paradigm shift. More comparable to the industrial revolution than the Internet revolution. The fundamental measure, productivity capacity is no longer calories or joules, but tokens. This became strikingly clear 2 weeks ago at NVIDIA GTC, where I witnessed hundreds of companies applying AI to everything from straightforward tasks by cleaning and image generation to extraordinary complex applications, including protein folding, cystic simulations and even brain surgery. Walking the conference floor, speaking to the attendees, one thing was unmistakable. We've only begun to scratch the surface of AI's potential. Yet even in these early days, AI is already empowering individuals, communities and companies to accomplish exponentially more. We're witnessing Jevons Paradox unfold simultaneously across every industry, thanks to AI, where improved efficiency can paradoxically drive higher, not lower demand. It is literally never cost less to transform an idea into an action, a product, an image, a refined concept, a service or countless other outlets. The possibilities are truly limitless, and while no one can predict exactly how AI will reshape our future, uncertainty remains. It will require enormous amounts of power. Our 2.2 gigawatts of capacity and strategically position land across Pennsylvania, Washington and Quebec sit directly in the path of this transformation, and we intend to capitalize on that opportunity for our shareholders. We look forward to the opportunities ahead. With that, I would like to open the call to Q&A. Operator, please go ahead. Operator: [Operator Instructions] And our first question comes from Mike Grondahl with Northland. Mike Grondahl: First question, Ben, you talked about your decision not to go the GPU rental route at Moses Creek. And just the colocation route, could you talk a little about what a couple of the major drivers were that got you to that decision? Ben Gagnon: Yes, it's a great question, Mike. When we first started talking about in Q3, we were always evaluating this alongside with the colocation. We're trying to maximize the value for shareholders. So we're always going to evaluate multiple different business models at our sites. And because they have the lowest cost energy and all these other benefits, we thought it would make a lot of sense. But as we've continued to have increasing amounts of customer conversations for Washington and other sites. It was just really clear to us that the best opportunity for us is to just remain a pure-play infrastructure developer and owner and let these customers who really want these megawatts lease these megawatts. Mike Grondahl: Got it. Got it. And then maybe secondly, you articulated, I'll say, a philosophy a quarter or 2 ago about waiting and waiting on signing a lease as terms were continuing to improve kind of implying you're going to be really patient and wait on a lease. Could you kind of update how you're thinking about that lease execution strategy and the potential timing around it? Ben Gagnon: Yes. Our strategy on lease execution has been consistent. It remains consistent today. Our view is that the best way to maximize value for shareholders is to get the best terms in a lease because that's going to be what is going to be driving our NOI and our multiple. And so when we're looking to sign 10- to 15-year agreements, it's really important for us to take the -- maybe a little bit more time than investors may want us to in order to get better terms for longer. When it looks at what is really driving the value in these lease economics, one of the biggest elements is risk, and we've spoken to this multiple times over the last couple of months. And the biggest risk for most of the people -- to go out there and have conversations and get a lot of interest. And in some cases, you could even sign a lease prior to getting permits. But all of that risk is going to be priced into the agreement, you're going to be locked into it for 10 to 15 years, and that's going to negatively impact the long-term value that we're creating for shareholders. So our strategy has been incredibly consistent. And the benefit for us is that we are operating in high demand markets with high barrier to entry. So it takes a little bit longer to get permits going in Pennsylvania or in Washington than it does in Texas, which is the easiest market in the United States for that. But we believe that drives a lot of extra value because it's way more scarce, it's way harder to acquire and there's just not as much optionality. Operator: Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Brett Knoblauch: Maybe to start, could you maybe just go into detail on what permits at what sites you guys are waiting to receive? Ben Gagnon: So permits is a complicated process, and we are develop -- we're getting permits across multiple sites in multiple jurisdictions. So they all have different rules, different regulations, different time lines, different reviews, different authorities. So it's far too much detail to get into exactly what permits are remaining on all the different sites. But we are continuing to make good progress and kind of -- we're looking at the visibility over the next couple of months. And with what we've had so far with the community engagement success that we've had so far, we think that in the coming months, sometime around the mid- to late summer time. we should be achieving the full permitted status across at least one, if not all of the sites. Brett Knoblauch: And then maybe just on the leasing environment across the different sites that you guys have. I guess we were under the impression that maybe Sharon would be first to go given it's relatively further along. Is that still how you guys are thinking about it? And then in the presentation when you guys kind of list the power pipeline and road map. How much of that is from generation on site that you guys are looking into? And do you have any update on where you guys are with respect to sourcing that generation? Ben Gagnon: Yes, sure. So the -- to answer the second part of your question first, all the power that we're talking about developing for our HPC and AI data centers right now is grid connected. So the two operating power plants that we have at Scrubgrass and Panther Creek. Currently, that math is not in those charts for the secured capacity or the site development plans. But in Scrubgrass particular, we are working to expand the generation capacity there with natural gas. So we've been working to tap into the Tennessee Natural Gas Pipeline. We're achieving pretty good results there with the engineering firms. There's still probably another month or two to go before we're getting a clear path forward on the engineering plans. But Scrubgrass is our more of our pipeline site. And so those -- that power generation opportunity is more of a 2028 and 2029 time line. Everything else is grid connected, it's secure today or it's currently active. And sorry, Brett, I'm blanking on the first part of your question, would you mind repeating it? Brett Knoblauch: Yes. Just on maybe the cadence of which sites are -- quicker to go? Ben Gagnon: Yes. So really, that's going to be driven by success on permitting time lines in the customers. So all three of the sites, Moses Lake, Sharon and Panther Creek are all actively in our go-to market right now. Every single one of those has customers engaged under NDA, and they have for quite some time. And so we're continuing to push forward on those conversations and those negotiations. Really, I think what investors should think about with regards to permits, permits are more of a closing condition to a lease, right? They're really not a starting condition to a negotiation. So we have these conversations and these negotiations simultaneously while we're working towards permitting. As permitting gets closer and closer, the negotiations will also get closer and closer in tandem and the first site to get leased is likely to be the first site to be permitted. Operator: Our next question comes from Stephen Glagola with KBW. Stephen Glagola: Just on that last point, if you could clarify the sequencing here between like notice to proceed and lease execution. So in other words, like can you pre-sign leases contingent on notice to proceed? Or is like notice to proceed required before any major customer would commit to a lease? Ben Gagnon: For a customer commit to binding in our view, they're going to want NTP, and that's based on the number of conversations that we are continuing to have and there probably are some customers who would be interested to sign prior to NTP, but those aren't the investment-grade counterparties that we're really seeking to engage with. Stephen Glagola: Okay. And then just one more. How are you thinking about like Vera Rubin hardware availability in '26 and like early '27? And to what extent could that variability in supply influence the timing of lease discussions at your sites? Ben Gagnon: Yes. That's a good question, Stephen. We've been talking about Vera Rubin, I think, since Q3 call because all of our sites are basically coming online in 2027. So we're trying to make sure that they are designed for the highest level of equipment that's coming out in '27 and '28, which is the Vera Rubin. In terms of supply, we haven't seen any impact so far. I understand there's always geopolitical uncertainty in the world that may impact those supply chains. But given that energy is such a huge bottleneck, and it's always been a huge bottleneck on the growth. I don't think that there is going to be a geopolitical situation that's going to make the bottleneck change from energy over to GPUs. So we don't have any expectation right now that, that's going to have any impact on leasing or demand for sites because power is still such an extreme bottleneck. It's hard to imagine what's going to overshadow that geopolitically. Operator: Our next question comes from Michael Donovan with Compass Point. Michael Donovan: Congrats on the progress. Can you provide an update on ESA progress, specifically Panther Creek's ISA to ESA conversion? Ben Gagnon: Yes. So that's a great question, Mike. As investors probably know, we have 350 megawatts secured ESA with PPL. But in addition to that, we also have an ISA that enables us to draw down approximately 60 megawatts from the grid, and that's associated with the existing transmission line and substation for the power plant that we currently have operating. In order to get that converted over, it's really more of a regulatory matter. And so it's hard to put an exact time line as to when those stamps are going to be received, but there's no infrastructure that needs to be built. There's no CapEx that needs to be spent. Really, it's just a matter of getting the regulatory approval to convert a nonfirm service into a firm service, and that would enable us to increase our capacity beyond 350 megawatts to what we probably expect is going to be maybe 400 megawatts or possibly slightly more. We expect this is going to happen this year, but it's hard to put an exact time line on it, given it's a regulatory matter. Operator: Our next question comes from Brian Kinstlinger with AGP. Brian Kinstlinger: Last quarter, Ben, you communicated, you expected the GPU as a service and Moses Lake site would be targeted for, I believe, the first quarter for go-live. How are you shifting to co-location change the timing if at all? And my second question is, can you talk about also how the global memory shortage is impacting your site development or changing your near-term needs or planning for lead times? Ben Gagnon: Yes. So two parts to that question. In terms of switching from a GPU as a service to co-location just changing the business model doesn't really impact the development time line. So we don't really see any delay there associated with changing from GPU as a service, just to co-location. Really, it's just a matter of how we want to allocate our capital and how we want to focus the business. When it comes to the memory shortage. As a pure-play infrastructure developer and owner that really is not coming into our calculus very much, mostly that's a customer situation for them to resolve with their own supply chain because we're not the ones investing in the GPUs and the compute and the servers. Operator: Our next question comes from Martin Toner with ATB Cormark Capital Markets. Martin Toner: Good morning. Can you guys elaborate or [indiscernible] can you kind of give us some time line thoughts there? Ben Gagnon: So I'm going to repeat the question because it was a little quiet, just in case nobody else or other people had difficulty hearing. I believe the question was, can you give some time lines as to how we might be able to expand Panther Creek to 500 megawatts and beyond? So in order for us to move beyond the 350-megawatt ESA that we have secured, there's really two sources for expansion. The first is converting over that ISA from non-firm service to firm service that I just spoke to a minute ago. And that's really a regulatory matter that we expect to be resolved sometime this year. It could be tomorrow, it could be a few months from now. And then when it comes to expanding beyond that, what we have to do with that is we have to actually have new power applications. The good thing here is that the utilities are actually looking to invest in new generation in the area. So in this particular instance, and we weren't actually applying for new power. We actually have the utility call us and ask us how much more power we could take on site. Given the bottleneck constraint on power, that was obviously a very welcome call over here at Bitfarms to receive. And it's a pretty unusual one in the industry, but they're looking to scale up generation capacity in the area, specifically to service our site at greater capacity. So this is probably going to be 2 to 3 years time line because there's a lot of process involved with spinning up new generation and building those new transmission lines. But for a lot of our customers, what they really want is the fastest pathway to energization and a clear path to scale over multiple years. And so this really lines up with what the hyperscalers and what the neoclouds are searching for. Martin Toner: That's great. Hopefully, you can hear me better. Can you clarify when you expect to sign your first lease? Ben Gagnon: So I can't get into a specific time line. But in terms of milestones, as I spoke to earlier, it's really about clearing NTP as kind of the last closing condition or last milestone for us to sign a lease. So I think for the investors and the analysts on the call, the important thing to keep track of, especially over the next coming months is the continued progress that we have towards NTP because once NTP is clear, that's basically the last thing standing between us and a signed agreement. Martin Toner: Got it. Great. And last one from me. Can you talk a little bit about why mining exahash in Q4 was at the level that it was at? Ben Gagnon: So we continue to scale back our mining exposure as we continue to focus on our U.S. HPC infrastructure investments. So we haven't made any investments into Bitcoin mining. We're not spending any money on upgrades or new miners, and we're actively working to scale down the fleet and actively working to spin off assets like we have in Paraguay that are not suitable for conversion. So investors should continue to expect our hash rate to continue to trickle down over 2026 as we continue to execute on this transition to HPC and AI. Operator: Our next question comes from Mike Colonnese with H.C. Wainwright & Company. Michael Colonnese: So, Ben, I'm just curious, after securing the remaining permits across the three sites, which sounds like likely to take place in the coming months here, what does the time line look like from a data center construction and delivery standpoint? It sounds like you're pretty optimistic that revenue generation could commence as soon as next year, but any additional color there would be helpful. Ben Gagnon: Yes. I mean, really, this is the year of execution in 2027 is the year of delivery. And so at all three of our projects that we talked about today, Panther Creek, Sharon and Washington, we all expect them to come online and start delivering megawatts and start generating revenue to customers in 2027. We'll continue to provide updates as we go along. And I think once we have cleared NTP and we have signed leases, there's going to be a lot clear visibility that we can provide to investors for each specific project and their specific time lines. Michael Colonnese: Got it. And then back to Bitcoin mining operations, it sounds like you're progressively going to be scaling back hash rate as you bring some of the HPC AI data centers online. I guess what's the best way to think about hash coming offline and kind of flowing through your operating results over the near term here? Ben Gagnon: I'll speak to it at a high level and then maybe I'll pass it off to Jonathan for some further clarity. But right now, the Bitcoin mining remains profitable, but it's not it's not very -- it's marginal. So it's still contributing to the business. But really, it's not the focus of the business. It's not where we're investing our time, it's not where we're investing our efforts. And given that we have been so successful last year in raising capital and strengthening our balance sheet. It's really not super impactful for the developments that we have this year, the operations or the CapEx. So we'll just continue to scale that down, trying to maximize value in the disciplined exit. If it makes more sense to maybe sell some miners a little bit earlier then we might need to in order to begin instruction, we'll evaluate that as we will always do to maximize value for our shareholders. But really, we kind of see this as a pretty minor element of our balance sheet and a minor element of the financial plan for this year. Jonathan, do you want to add anything further? Jonathan Mir: Only that when we think about our liquidity going forward, the strategic objective is to ensure we are well capitalized through the lease process and beyond without the need to raise any new capital in the markets and that takes into account the current state of Bitcoin mining operations. It's not assuming any improvement in the economics there. So our plan is built on conservative assumptions around the status of the Bitcoin market. Operator: Our next question comes from Nick Giles with B. Riley Securities. Nick Giles: Good morning, Keel team. In the interim period where Bitcoin mining operations are wound down, but kind of pre-revenue generation on the HPC side, could the generating assets at Panther Creek and Scrubgrass be utilized in any way such as the PJM capacity auction? Ben Gagnon: So those power plants do actually participate in PJM capacity auctions. We've done that for quite some time. And so we do benefit from the capacity payments that we received there. Nick Giles: Got it. Okay. And any order of magnitude of what those could be kind of in the 2026 planning year? Ben Gagnon: So I mean, really, it's -- we've kind of maxed out on the capacity auction payments. They set a ceiling, and that's where the capacity auction payments closed. Nick Giles: Got it. Understood. Maybe one for Jonathan. You've made some progress on the capital structure, but just was hoping for any additional comments you might have on what you're looking for in an initial debt package, how you're seeing term shift and kind of what tools you have at your disposal during construction and kind of post energization. Jonathan Mir: Good question. Thanks, Nick. So our basic approach is to compare and contrast our financing options down at the asset level and upstairs at the parent level. And certainly, one of the things that we've seen in the market that has caught our attention like everyone else, is the tightening of spreads between folks issuing high-yield debt in the market that would seem like quite attractive levels for strong investment-grade counterparties or credit wraps. And those converging towards the levels seen in bank-originated classic construction of project financing. So we'll be -- each of those has its own advantages in terms of simplicity of managing the actual capital once it's raised versus negative carry costs. And as we get closer to a funding point, we'll make the decision as to what seems best for our shareholders in terms of how we decide to finance. I'm sorry, Nick, I was just going to say that the markets for our space and for infrastructure generally seem calm right now. Operator: Our next question comes from Brian Dobson with Clear Street. Gregory Pendy: It's Greg Pendy in for Brian Dobson. Just I guess one final one. Just I guess, one final one. Just on the redomiciling to the U.S., are there any implications to costs or structural implications in terms of ownership that we should be aware of as you enter this over the next couple of days? Ben Gagnon: One of the benefits and reasons for the redom is that we will now be eligible for inclusion in indices that require -- want to be a U.S. domiciled company. So for example, we'll be eligible for inclusion in the Russell 1000 and the Russell 3000 as well as for ownership in any other fund who was otherwise limited to the purchase of U.S. securities. We view that as being quite helpful in terms of moving our shareholder base to one that is institutional and long term. There are no other -- there are no cost or flexibility implications in our end. We simply see this as a nice path forward with a lot of benefits for our shareholders. Operator: Our next question comes from Bill Papanastasiou with Chardan Capital Markets. Bill Papanastasiou: Just wanted to touch on the Washington side and decision to shift towards colo. Can you confirm that this won't have any material impact on the purchase commitment that was entered into November? Or is the team considering the shift in development allocation to other sites? Ben Gagnon: Thanks, Bill. No impact on the capital commitments and the equipment we've already purchased for the Washington site by changing business models. In fact, actually, it just helps to reduce the CapEx because we're no longer paying for the compute. Bill Papanastasiou: Understood. And then how should we generally be thinking about maintenance CapEx on existing Bitcoin mining sites as you gradually shift over to AI HPC here? Ben Gagnon: We're not making any investments into the Bitcoin mining sites. Basically, we're just continuing to keep them up and running. And so no further investments are being made in the sites into new sites or into new miners. Operator: Thank you. This concludes the question-and-answer session. I'd like to turn the call back over to Ben Gagnon for closing remarks. Ben Gagnon: Thank you very much, everyone, for joining our call today and really look forward to speaking to you next time as Keel Infrastructure. Have a great day. Operator: Thank you for your participation. This does conclude the program. You may now disconnect.
Operator: Good day, and welcome to the Bitfarms Fiscal 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded. I would like to turn the call over to Jennifer Drew-Bear from Bitfarms Investor Relations. Please go ahead. Jennifer Drew-Bear: Thank you, and welcome to Bitfarms Fiscal Year 2025 Conference Call. With me on the call today are Ben Gagnon, Chief Executive Officer and Director; and Jonathan Mir, Chief Financial Officer. Before we begin, please note this call is being webcast with an accompanying slide presentation. Today's press release and our presentation can be accessed on our website under the Investors section. Turning to Slide 2. I'd like to remind everyone that certain forward-looking statements will be made during the call, and that future results could differ from those implied in this statement. The forward-looking information is based on certain assumptions and is subject to risks and uncertainties. And I invite you to consult Bitfarms 10-K for a complete list. Also, please note that references will be made to certain non-GAAP financial measures, and therefore, may not be comparable to similar measures presented by other companies. We invite listeners to refer to today's press release and our 10-K for definitions of the aforementioned non-GAAP measures and their reconciliations to GAAP measures. Please note that all financial references are denominated in U.S. dollars, unless always noted. And now turning to Slide 3. It is my pleasure to turn over the call to Ben Gagnon, Director and Chief Executive Officer. Ben, the floor is yours. Ben Gagnon: Good morning, everyone, and welcome to our fiscal year 2025 earnings call. In 2025, we made a bold decision to walk away from our legacy business, Bitcoin, and build the infrastructure in North America for what comes next, HPC and AI. It was a year of deliberate and consequential transformation with a clear mandate. Secure North American pipeline, strengthen our balance sheet, accelerate site development, and position ourselves to engage customers from a place of operational momentum at the peak of the energy bottleneck constraining the growth of AI. I can say with confidence and pride that we accomplished exactly what we set out to do. The foundation you see today, the capital structure, the sites, the team, the strategy was engineered through deliberate choices, developed with discipline and built to propel us forward. We made foundational changes to reposition the business and made 100% of our focus on North American HPC infrastructure development. No half measures, no compromises and in time, no Bitcoin. We built a new company. And while we are presenting as Bitfarms today, tomorrow marks our beginning as Keel infrastructure. The name says it all. A Keel is the bottom of structural component of a vessel. It's what keeps it stable and moving forward in the right direction regardless of the condition above the water line. It is structural, it is essential, and it is exactly how we see our role in the HPC and infrastructure landscape. We are not here to compete with hyperscalers or neoclouds. We are here to enable them. Our focus is providing the critical and largely invisible foundation that will allow the world's most advanced AI platform to deploy on time and scale without interruption. We expect to close the re-domiciliation and finalize our rebranding efforts tomorrow, April 1, and we'll begin trading under the ticker KEEL, 2 business days after completion of the transaction on the Nasdaq and the TSX. We are entering this new phase from a position of strength. With over 2 gigawatts in our pipeline, Keel is a regional leader with some of the largest power land portfolios in some of the highest demand markets in North America and with robust financial strength to execute against our plan. Our current liquidity is far in excess of the CapEx budgeted to get us through permitting and ultimately to start signing leases, giving the company significant financial flexibility to execute on our strategy. And our strategy is equally as clear. We are designing all of our site and campus developments as either powered shell or co-location facilities. We believe this is where we can deliver the most value to shareholders and serve our potential customers at the speed and to the specifications they need. We were originally exploring in parallel to co-location the potential benefits of pursuing a small amount of GPU as a service at our Washington site, Moses Lake, where due to the lowest cost power for data centers in the country and a relatively smaller footprint, we believe it could be an avenue to drive additional shareholder value. Since our last quarterly call, we have spoken with an increased volume of potential customers. And it's clear from those conversations, the most accretive business model for the site is one of co-location. This is not specific to Moses Lake and applies to all of our other sites as well, where demand is even higher. So we will focus on what we do best, being an infrastructure developer and owner. This plays directly to our core competencies. We are a team of developers united by disciplined action, building cost-effective institutional-grade infrastructure at the pace our customers require. The same capabilities have built our energy platform, speed to market, capital discipline, operational rigor precisely what HPC and AI deployments demand today. This is just the natural extension of what we do best. So with all the pieces in place and with the overwhelming support of our shareholders who voted over 99% in favor of the HPC and AI pivot, the U.S. redomicile and the rebrand. Starting tomorrow, we are Keel infrastructure. Turning to Slide 4. When we sat on our pivot, we developed a 3-year transformation plan, one that as of today, we are nearly halfway through completing. In 2025, we did the intensive foundational work for our transformation, including the Stronghold acquisition, securing more power in Pennsylvania, rebalancing the portfolio to North America, a $588 million raise fully institutional and oversubscribed, our U.S. GAAP transition, New York headquarters and establishing a new executive team. This work is done. With power and land secured in some of the power markets that matter most, a team of internal experts and strategic partners that have built data centers for the largest companies in the world and a balance sheet engineered to see us through 2026, we are well positioned to continue our site development and deliver against the time lines, our prospective hyperscalers and neocloud customers need. 2026 is all about execution. Effective tomorrow, we will have completed our redomiciliation to the United States and officially rebranded as Keel infrastructure. Two major milestones that position the company for the next phase of growth. With that complete, we expect the next significant milestones to come from executing against our development at Panther Creek, Sharon and Moses Lake, where we are moving full steam ahead and working diligently across three simultaneous and active work streams. One, finalizing permits, which we expect to be done in the coming months. Two, continued work on architecture and engineering in line with ongoing customer conversations and requirements. And of course, three, our go-to-market to secure highly financeable leases with investment-grade tenants. Commercialization is well underway. The upcoming milestones investors can expect are completion of preconstruction activities like permitting, progress in customer engagement and ultimately lease execution, which we are confident we can achieve this year and will be major catalysts. 2026 is also the year where we expect to leave Bitcoin and Bitcoin mining behind. While we were probably one of the first miners to commence wind down of our Bitcoin mining exposure to reinvest that capital into infrastructure for HPC and AI, we will be accelerating those efforts in 2026 as site developments progress. 2027 is all about delivery. This is the year when we anticipate that sites would come online, we'd begin delivering megawatts to customers, HPC and AI revenue really begins and we complete our transition to a premier North American HPC and AI infrastructure company. By the end of 2027, we expect Keel will be a proven infrastructure developer and a regional leader across Pennsylvania, Washington and Quebec, and we will just continue to grow and scale from there in 2028 and beyond to over 2 gigawatts as we execute against our expansion capacity. Turning to Slide 5. In HPC infrastructure, power, location and time lines are everything. We hold something scarce and valuable secured power, land and expansion capacity in Pennsylvania, Washington State and Quebec. Some of the most in-demand markets with some of the biggest barriers to entry. We know it and so do our potential tenants. Our campuses offer solutions to hyperscalers and neocloud's greatest scaling problems, location, proximity and fiber connectivity to major metro areas and data center clusters solving for latency issues and giving our tenants proximity to their own customers and other data centers. Time lines. Our robust secured power for '26, '27 and with expansion capacity in 2028 is highly coveted in an environment where energy capacity is hard to find and multiyear waitlists are the norms. We create value for tenants by enabling them to deploy years earlier by leasing from us rather than to invest in growing organically. An energy-efficient cool climate, the lower the PUE, the more critical megawatts. Panther Creek is a great example of seeing the hyperscaler and neocloud's appetite at play. While there is a lot of interest in the site last year, inbound customer activity surged after we secured zoning in February. This is not a coincidence. It is the proof point and one that we've been making for the last year, but may still be confusing to some investors. So we'd like to be clear that investment-grade tenants value derisk sites where they can move from lease to revenue fast. The more we advance, the better our leverage. The better our leverage, the better the leases, and the more long-term value we create for shareholders. Turning to Slide 6. It is indisputable that power is the binding constraint for AI infrastructure deployment and will remain so for the coming years. Leading investment banks, Goldman Sachs, JPMorgan, Wells Fargo, Guggenheim, Moelis, they've all published extensively on this. And the consensus is clear. New power generation cannot come online fast enough to meet AI demand today, tomorrow or in the next 5 years. This bottleneck is structural, not cyclical. Hyperscalers and neoclouds that used to plan on 12-month horizons are now locking in 24- to 36-month supply chain commitments. Not tied to specific projects, but as platform level agreements and are now actively competing for the power and land to deploy it. While you are probably familiar with this information, here you can see a summary of the five development sites. The power we have secured and in some cases, the incremental power opportunities that make up our 2.2 gigawatt pipeline. Turning to Slide 7. I want to take a moment to put our current valuation context because there is a meaningful disconnect between where we trade today and the value we are positioned to capture as a company. When we analyze our current valuation against our peers, the picture becomes clear, at approximately $1.9 million per available megawatt of secure 2027 capacity, we're trading in the middle of a Bitcoin miner Group, valued at roughly $1.7 million to $2.1 million for 2027 megawatt meaning we are being valued based on having power but not what we are doing with it. For shareholders and bondholders, we see three distinct catalysts, each capable of driving meaningful reratings. The first is obviously lease execution. Across our sector, companies that have signed leases trade at $4 million to $6 million per 27 megawatts, a 2 to 3x premium to where we are today. This is the market's consistent signal driven entirely by lease execution, not facility delivery, not revenue generation, just signed leases. A signed lease secures revenue and financing derisking the developments. The market pays for that with nearly 500 megawatts actively being commercialized today and visibility on permitting across Panther Creek, Sharon and Moses lake, this catalyst is well within reach. The second catalyst and arguably the most powerful for long-term holders is securing our expansion capacity. 2/3 of our 2.2 gigawatt portfolio or approximately 1.5 gigawatts is expansion capacity, which we believe the market is assigning little to no value. While securing these megawatts is a process that will take more time, we believe additional megawatts can be secured in the second half of 2026 requiring very little CapEx while representing significant embedded value as powered land even before a lease is signed or there is a shovel in the ground. The third catalyst is delivering in 2027. Once facilities are derisked through commissioning and begin generating revenue under long-term contracts, the development risk should drop dramatically and the operator valuation numbers become transformational yet again. We are not taking a leap of faith on technology, our ability to see our power or market demand. The tech is here. The power is secured, the sites are advancing, the inbound demand is real, but the market has not yet priced in is the transformation that happens when a developer becomes a counterparty when we move from site advancing to lease executing. This is the main opportunity ahead of us to accelerate permitting, execute leases, secure our expansion capacity and ultimately deliver to our customers. This is how we will create value for our shareholders and bondholders. Turning to Slide 8. Our execution plan is defined by six areas, each supporting our ability to deliver at the pace and scale our future customers require. First, we've secured our deep bench of talent by adding over 60 years of infrastructure and development in over 50 years of data center construction experience combined in just the past few months. People have delivered at scale for the most demanding customers in the world. Jonathan Mir joined as CFO, bringing 25 years of energy infrastructure strategy and project finance expertise. We have also added an SVP of construction and of power, a VP of HPC Operations and Head of permitting to oversee the execution of these critical functions. We've assembled the right team to execute on our vision. Second, we are engaging the right industry leaders as partners, T5, Turner Construction, Corgan, [ WWT ], Vertiv. These firms have built data centers for the world's largest hyperscalers not once but hundreds of times. When customers look at our project partners, which will be available on the new website when it launches tomorrow, they will see that we have also assembled the right partners to ensure better outcomes. Third, we have the capital required to bring our sites to market. As of March 27, 2026, our liquidity stands at $520 million in cash and Bitcoin, which we expect is much more than the CapEx budgeted to get us to a lease at Panther Creek, Sharon and Washington. Jonathan will go into more detail on our capital position and financing strategy shortly, but the headline is simple. We're well funded and can move fast. Fourth, a disciplined Bitcoin exit. It is clear we are no longer a Bitcoin miner. However, with strong, robust liquidity, we can have a disciplined approach to our exit strategy. We will continue to operate up until the time sites need to be prepared for construction maximizing free cash flow before selling the miners. We will also opportunistically sell Bitcoin into strength to capture and reinvest every dollar we can into HPC and AI infrastructure. Fifth, power assets that cannot be replicated. Our megawatts sit in regions with large barriers to entry, Pennsylvania, Washington State and Quebec, all have multiple year waitlists. No one is cutting the line. Our 350 megawatts at Panther Creek, 110 megawatts at Sharon and 18 megawatts in Washington were secured before the AI demand wave made these markets highly coveted. This isn't power others can easily replicate giving us competitive edge with high-quality tenants to understand these markets and are hungry for assets like ours, which leads us to our sixth point. In this market, speed to power is what drives value. For our customers, the opportunity cost of delayed deployment is huge. So the priority is getting capacity online as quickly as possible. Every day of delay is lost revenue. As a result, power availability and certainty of delivery are the primary drivers of lease economics. This dynamic has pushed lease rates higher since our Q3 call, exactly as we said it would. The opportunity in front of Keel infrastructure is real. We now have the assets and the team is ready. I'm so proud of what we built in 2025, and I'm confident in what we'll deliver in 2026 and 2027. With that, I'll turn the call over to Jonathan. Jonathan Mir: Thanks, Ben. Turning to Slide 9. I joined the team 5 months ago. My focus has been on sharpening our approach to capital allocation, strengthening our balance sheet and capital structure and ensuring the financing actions support long-term shareholder value creation. I've had a front row of the depth of talent, the operational discipline and the strategic momentum across Bitfarms. I work closely with our operations and development teams both to understand the current trajectory of our assets and to ensure our capital plans are aligned with the opportunities ahead. What stood out to me is the extraordinary potential we have driven by the quality and potential of our sites, a strong balance sheet, the best liquidity position in the company's history and a broad team that's both deeply engaged and committed to excellence. We're moving quickly and with purpose. I'm pleased to be here with you today and discuss the progress we're making. I'll use this time to walk through our performance for fiscal year 2025 and outline our current capital strategy that we believe supports the accretive growth we're targeting for 2026 and beyond. Turning to Slide 10. Before discussing our financials for the quarter, I want to briefly frame the results are presented this quarter. As of Q3 2025, the Paso Pe facility in Paraguay has been classified as held for sale. As a result, all revenues, operating costs and asset balances associated with Paso Pe are treated as discontinued operations in our fiscal year 2025 financials. So when I refer to continuing operations, I am speaking exclusively about our North American platform, the foundation of our transition into HPC and AI infrastructure. With that, revenue for fiscal year 2025 was $229 million, up 72% year-over-year. Operating loss for fiscal year 2025 was $150 million including noncash depreciation of $98 million and $28 million of impairment charges. This compares to an operating loss of $28 million in 2024, which included $102 million of noncash depreciation and $4 million of impairment charges. Net loss for 2025 was $209 million or a $0.38 loss per basic and diluted share compared to a 2024 net loss of $7 million or $0.02 loss per basic and diluted share. The differences between 2024 and 2025 were driven by a number of factors, including change in fair market value of digital assets, primarily due to the decline of Bitcoin prices and realization of gains on disposal of Bitcoin during the year. Two additional items also impacted year-over-year comparability. First, we saw a loss of $68 million, reflecting changes in our derivative assets and liabilities. Second, 2025 impairment charges were $25 million higher than in 2024. For the year, our adjusted EBITDA was $29 million compared to $31 million in 2024. Turning to Slide 11. 2025 was a deliberate year of balance sheet optimization and improvement, providing the foundation for our next phase of growth. We successfully issued an oversubscribed $588 million convertible offering, significantly expanding our liquidity. And in February, we repaid the Macquarie debt facility eliminating legacy debt, simplifying our capital structure and freeing the company from covenants. Each of these supports the pursuit of our HPC infrastructure strategy. The Macquarie facility had been originally used to accelerate development at Panther Creek, funding critical project activities, including long lead time item procurement and substation work. Retiring the facility was a strategic decision, strengthens the balance sheet and gives us the flexibility to secure a more cost-effective financing at either the parent or project level. Our current cash position of $520 million provides the runway to advance Panther Creek, Sharon and Moses Lake through lease execution without accessing capital markets. Though we may do so if attractive opportunities arise that improve our ability to deliver the best possible long-term risk-adjusted shareholder returns. Macquarie was an excellent partner, and we appreciate their support so early in our pivot to HPC AI infrastructure. Turning to Slide 12. As we pivot to commercialization of our development sites, we have a clear financial strategy based on three principles. Capital allocation, capital formation and capital structure. Taken together, they are designed to deliver the best possible long-term risk-adjusted shareholder returns. First, capital allocation. We deploy capital into projects where the earnings potential exceeds their weighted average cost of capital. We rotate capital from businesses that are noncore or earning less than optimal returns and deploy the capital into higher return investments. Second, capital formation. Our financing strategy is designed to fund our very large growth opportunities while maintaining the liquidity needed for a stable base of operations. We will be opportunistic in our financing execution. We will fund construction of our data center projects using project or parent level bet and project or parent level equity or equity-linked offerings. We're taking a disciplined approach and at this time, are well capitalized to actively commercialize and execute leases across Panther Creek, Sharon and Washington. Third, capital structure. Our capital structure is designed to capture the best possible long-term risk-adjusted shareholder returns while also retaining overall corporate flexibility and support growth. Our objective is to operate with a deliberate liquidity strategy in order to enable clear-headed commercial decisions and capital allocation decisions rather than having liquidity drive time lines. Stepping back, our road map is clear. We are building a regionally focused high-growth HPC AI infrastructure platform, grounded in disciplined capital allocation, a strengthened balance sheet and a development cadence that maximizes returns and minimizes risk. We're funded through the key derisking stages, permitting and leasing across Moses Lake, Sharon and Panther Creek and we're entering 2026 with momentum, optionality and a balance sheet engineered for growth. We have the right people, assets, liquidity and strategy and we're well positioned to capture for our shareholders the long-term value potential we have today. With that, I'd like to return the call to Ben for closing remarks. Ben Gagnon: Thanks, Jonathan. A little over a year ago, as our team began actively integrating AI into both our business and our daily lives, we came to a realization. This isn't just another technology cycle. It's a paradigm shift. More comparable to the industrial revolution than the Internet revolution. The fundamental measure, productivity capacity is no longer calories or joules, but tokens. This became strikingly clear 2 weeks ago at NVIDIA GTC, where I witnessed hundreds of companies applying AI to everything from straightforward tasks by cleaning and image generation to extraordinary complex applications, including protein folding, cystic simulations and even brain surgery. Walking the conference floor, speaking to the attendees, one thing was unmistakable. We've only begun to scratch the surface of AI's potential. Yet even in these early days, AI is already empowering individuals, communities and companies to accomplish exponentially more. We're witnessing Jevons Paradox unfold simultaneously across every industry, thanks to AI, where improved efficiency can paradoxically drive higher, not lower demand. It is literally never cost less to transform an idea into an action, a product, an image, a refined concept, a service or countless other outlets. The possibilities are truly limitless, and while no one can predict exactly how AI will reshape our future, uncertainty remains. It will require enormous amounts of power. Our 2.2 gigawatts of capacity and strategically position land across Pennsylvania, Washington and Quebec sit directly in the path of this transformation, and we intend to capitalize on that opportunity for our shareholders. We look forward to the opportunities ahead. With that, I would like to open the call to Q&A. Operator, please go ahead. Operator: [Operator Instructions] And our first question comes from Mike Grondahl with Northland. Mike Grondahl: First question, Ben, you talked about your decision not to go the GPU rental route at Moses Creek. And just the colocation route, could you talk a little about what a couple of the major drivers were that got you to that decision? Ben Gagnon: Yes, it's a great question, Mike. When we first started talking about in Q3, we were always evaluating this alongside with the colocation. We're trying to maximize the value for shareholders. So we're always going to evaluate multiple different business models at our sites. And because they have the lowest cost energy and all these other benefits, we thought it would make a lot of sense. But as we've continued to have increasing amounts of customer conversations for Washington and other sites. It was just really clear to us that the best opportunity for us is to just remain a pure-play infrastructure developer and owner and let these customers who really want these megawatts lease these megawatts. Mike Grondahl: Got it. Got it. And then maybe secondly, you articulated, I'll say, a philosophy a quarter or 2 ago about waiting and waiting on signing a lease as terms were continuing to improve kind of implying you're going to be really patient and wait on a lease. Could you kind of update how you're thinking about that lease execution strategy and the potential timing around it? Ben Gagnon: Yes. Our strategy on lease execution has been consistent. It remains consistent today. Our view is that the best way to maximize value for shareholders is to get the best terms in a lease because that's going to be what is going to be driving our NOI and our multiple. And so when we're looking to sign 10- to 15-year agreements, it's really important for us to take the -- maybe a little bit more time than investors may want us to in order to get better terms for longer. When it looks at what is really driving the value in these lease economics, one of the biggest elements is risk, and we've spoken to this multiple times over the last couple of months. And the biggest risk for most of the people -- to go out there and have conversations and get a lot of interest. And in some cases, you could even sign a lease prior to getting permits. But all of that risk is going to be priced into the agreement, you're going to be locked into it for 10 to 15 years, and that's going to negatively impact the long-term value that we're creating for shareholders. So our strategy has been incredibly consistent. And the benefit for us is that we are operating in high demand markets with high barrier to entry. So it takes a little bit longer to get permits going in Pennsylvania or in Washington than it does in Texas, which is the easiest market in the United States for that. But we believe that drives a lot of extra value because it's way more scarce, it's way harder to acquire and there's just not as much optionality. Operator: Our next question comes from Brett Knoblauch with Cantor Fitzgerald. Brett Knoblauch: Maybe to start, could you maybe just go into detail on what permits at what sites you guys are waiting to receive? Ben Gagnon: So permits is a complicated process, and we are develop -- we're getting permits across multiple sites in multiple jurisdictions. So they all have different rules, different regulations, different time lines, different reviews, different authorities. So it's far too much detail to get into exactly what permits are remaining on all the different sites. But we are continuing to make good progress and kind of -- we're looking at the visibility over the next couple of months. And with what we've had so far with the community engagement success that we've had so far, we think that in the coming months, sometime around the mid- to late summer time. we should be achieving the full permitted status across at least one, if not all of the sites. Brett Knoblauch: And then maybe just on the leasing environment across the different sites that you guys have. I guess we were under the impression that maybe Sharon would be first to go given it's relatively further along. Is that still how you guys are thinking about it? And then in the presentation when you guys kind of list the power pipeline and road map. How much of that is from generation on site that you guys are looking into? And do you have any update on where you guys are with respect to sourcing that generation? Ben Gagnon: Yes, sure. So the -- to answer the second part of your question first, all the power that we're talking about developing for our HPC and AI data centers right now is grid connected. So the two operating power plants that we have at Scrubgrass and Panther Creek. Currently, that math is not in those charts for the secured capacity or the site development plans. But in Scrubgrass particular, we are working to expand the generation capacity there with natural gas. So we've been working to tap into the Tennessee Natural Gas Pipeline. We're achieving pretty good results there with the engineering firms. There's still probably another month or two to go before we're getting a clear path forward on the engineering plans. But Scrubgrass is our more of our pipeline site. And so those -- that power generation opportunity is more of a 2028 and 2029 time line. Everything else is grid connected, it's secure today or it's currently active. And sorry, Brett, I'm blanking on the first part of your question, would you mind repeating it? Brett Knoblauch: Yes. Just on maybe the cadence of which sites are -- quicker to go? Ben Gagnon: Yes. So really, that's going to be driven by success on permitting time lines in the customers. So all three of the sites, Moses Lake, Sharon and Panther Creek are all actively in our go-to market right now. Every single one of those has customers engaged under NDA, and they have for quite some time. And so we're continuing to push forward on those conversations and those negotiations. Really, I think what investors should think about with regards to permits, permits are more of a closing condition to a lease, right? They're really not a starting condition to a negotiation. So we have these conversations and these negotiations simultaneously while we're working towards permitting. As permitting gets closer and closer, the negotiations will also get closer and closer in tandem and the first site to get leased is likely to be the first site to be permitted. Operator: Our next question comes from Stephen Glagola with KBW. Stephen Glagola: Just on that last point, if you could clarify the sequencing here between like notice to proceed and lease execution. So in other words, like can you pre-sign leases contingent on notice to proceed? Or is like notice to proceed required before any major customer would commit to a lease? Ben Gagnon: For a customer commit to binding in our view, they're going to want NTP, and that's based on the number of conversations that we are continuing to have and there probably are some customers who would be interested to sign prior to NTP, but those aren't the investment-grade counterparties that we're really seeking to engage with. Stephen Glagola: Okay. And then just one more. How are you thinking about like Vera Rubin hardware availability in '26 and like early '27? And to what extent could that variability in supply influence the timing of lease discussions at your sites? Ben Gagnon: Yes. That's a good question, Stephen. We've been talking about Vera Rubin, I think, since Q3 call because all of our sites are basically coming online in 2027. So we're trying to make sure that they are designed for the highest level of equipment that's coming out in '27 and '28, which is the Vera Rubin. In terms of supply, we haven't seen any impact so far. I understand there's always geopolitical uncertainty in the world that may impact those supply chains. But given that energy is such a huge bottleneck, and it's always been a huge bottleneck on the growth. I don't think that there is going to be a geopolitical situation that's going to make the bottleneck change from energy over to GPUs. So we don't have any expectation right now that, that's going to have any impact on leasing or demand for sites because power is still such an extreme bottleneck. It's hard to imagine what's going to overshadow that geopolitically. Operator: Our next question comes from Michael Donovan with Compass Point. Michael Donovan: Congrats on the progress. Can you provide an update on ESA progress, specifically Panther Creek's ISA to ESA conversion? Ben Gagnon: Yes. So that's a great question, Mike. As investors probably know, we have 350 megawatts secured ESA with PPL. But in addition to that, we also have an ISA that enables us to draw down approximately 60 megawatts from the grid, and that's associated with the existing transmission line and substation for the power plant that we currently have operating. In order to get that converted over, it's really more of a regulatory matter. And so it's hard to put an exact time line as to when those stamps are going to be received, but there's no infrastructure that needs to be built. There's no CapEx that needs to be spent. Really, it's just a matter of getting the regulatory approval to convert a nonfirm service into a firm service, and that would enable us to increase our capacity beyond 350 megawatts to what we probably expect is going to be maybe 400 megawatts or possibly slightly more. We expect this is going to happen this year, but it's hard to put an exact time line on it, given it's a regulatory matter. Operator: Our next question comes from Brian Kinstlinger with AGP. Brian Kinstlinger: Last quarter, Ben, you communicated, you expected the GPU as a service and Moses Lake site would be targeted for, I believe, the first quarter for go-live. How are you shifting to co-location change the timing if at all? And my second question is, can you talk about also how the global memory shortage is impacting your site development or changing your near-term needs or planning for lead times? Ben Gagnon: Yes. So two parts to that question. In terms of switching from a GPU as a service to co-location just changing the business model doesn't really impact the development time line. So we don't really see any delay there associated with changing from GPU as a service, just to co-location. Really, it's just a matter of how we want to allocate our capital and how we want to focus the business. When it comes to the memory shortage. As a pure-play infrastructure developer and owner that really is not coming into our calculus very much, mostly that's a customer situation for them to resolve with their own supply chain because we're not the ones investing in the GPUs and the compute and the servers. Operator: Our next question comes from Martin Toner with ATB Cormark Capital Markets. Martin Toner: Good morning. Can you guys elaborate or [indiscernible] can you kind of give us some time line thoughts there? Ben Gagnon: So I'm going to repeat the question because it was a little quiet, just in case nobody else or other people had difficulty hearing. I believe the question was, can you give some time lines as to how we might be able to expand Panther Creek to 500 megawatts and beyond? So in order for us to move beyond the 350-megawatt ESA that we have secured, there's really two sources for expansion. The first is converting over that ISA from non-firm service to firm service that I just spoke to a minute ago. And that's really a regulatory matter that we expect to be resolved sometime this year. It could be tomorrow, it could be a few months from now. And then when it comes to expanding beyond that, what we have to do with that is we have to actually have new power applications. The good thing here is that the utilities are actually looking to invest in new generation in the area. So in this particular instance, and we weren't actually applying for new power. We actually have the utility call us and ask us how much more power we could take on site. Given the bottleneck constraint on power, that was obviously a very welcome call over here at Bitfarms to receive. And it's a pretty unusual one in the industry, but they're looking to scale up generation capacity in the area, specifically to service our site at greater capacity. So this is probably going to be 2 to 3 years time line because there's a lot of process involved with spinning up new generation and building those new transmission lines. But for a lot of our customers, what they really want is the fastest pathway to energization and a clear path to scale over multiple years. And so this really lines up with what the hyperscalers and what the neoclouds are searching for. Martin Toner: That's great. Hopefully, you can hear me better. Can you clarify when you expect to sign your first lease? Ben Gagnon: So I can't get into a specific time line. But in terms of milestones, as I spoke to earlier, it's really about clearing NTP as kind of the last closing condition or last milestone for us to sign a lease. So I think for the investors and the analysts on the call, the important thing to keep track of, especially over the next coming months is the continued progress that we have towards NTP because once NTP is clear, that's basically the last thing standing between us and a signed agreement. Martin Toner: Got it. Great. And last one from me. Can you talk a little bit about why mining exahash in Q4 was at the level that it was at? Ben Gagnon: So we continue to scale back our mining exposure as we continue to focus on our U.S. HPC infrastructure investments. So we haven't made any investments into Bitcoin mining. We're not spending any money on upgrades or new miners, and we're actively working to scale down the fleet and actively working to spin off assets like we have in Paraguay that are not suitable for conversion. So investors should continue to expect our hash rate to continue to trickle down over 2026 as we continue to execute on this transition to HPC and AI. Operator: Our next question comes from Mike Colonnese with H.C. Wainwright & Company. Michael Colonnese: So, Ben, I'm just curious, after securing the remaining permits across the three sites, which sounds like likely to take place in the coming months here, what does the time line look like from a data center construction and delivery standpoint? It sounds like you're pretty optimistic that revenue generation could commence as soon as next year, but any additional color there would be helpful. Ben Gagnon: Yes. I mean, really, this is the year of execution in 2027 is the year of delivery. And so at all three of our projects that we talked about today, Panther Creek, Sharon and Washington, we all expect them to come online and start delivering megawatts and start generating revenue to customers in 2027. We'll continue to provide updates as we go along. And I think once we have cleared NTP and we have signed leases, there's going to be a lot clear visibility that we can provide to investors for each specific project and their specific time lines. Michael Colonnese: Got it. And then back to Bitcoin mining operations, it sounds like you're progressively going to be scaling back hash rate as you bring some of the HPC AI data centers online. I guess what's the best way to think about hash coming offline and kind of flowing through your operating results over the near term here? Ben Gagnon: I'll speak to it at a high level and then maybe I'll pass it off to Jonathan for some further clarity. But right now, the Bitcoin mining remains profitable, but it's not it's not very -- it's marginal. So it's still contributing to the business. But really, it's not the focus of the business. It's not where we're investing our time, it's not where we're investing our efforts. And given that we have been so successful last year in raising capital and strengthening our balance sheet. It's really not super impactful for the developments that we have this year, the operations or the CapEx. So we'll just continue to scale that down, trying to maximize value in the disciplined exit. If it makes more sense to maybe sell some miners a little bit earlier then we might need to in order to begin instruction, we'll evaluate that as we will always do to maximize value for our shareholders. But really, we kind of see this as a pretty minor element of our balance sheet and a minor element of the financial plan for this year. Jonathan, do you want to add anything further? Jonathan Mir: Only that when we think about our liquidity going forward, the strategic objective is to ensure we are well capitalized through the lease process and beyond without the need to raise any new capital in the markets and that takes into account the current state of Bitcoin mining operations. It's not assuming any improvement in the economics there. So our plan is built on conservative assumptions around the status of the Bitcoin market. Operator: Our next question comes from Nick Giles with B. Riley Securities. Nick Giles: Good morning, Keel team. In the interim period where Bitcoin mining operations are wound down, but kind of pre-revenue generation on the HPC side, could the generating assets at Panther Creek and Scrubgrass be utilized in any way such as the PJM capacity auction? Ben Gagnon: So those power plants do actually participate in PJM capacity auctions. We've done that for quite some time. And so we do benefit from the capacity payments that we received there. Nick Giles: Got it. Okay. And any order of magnitude of what those could be kind of in the 2026 planning year? Ben Gagnon: So I mean, really, it's -- we've kind of maxed out on the capacity auction payments. They set a ceiling, and that's where the capacity auction payments closed. Nick Giles: Got it. Understood. Maybe one for Jonathan. You've made some progress on the capital structure, but just was hoping for any additional comments you might have on what you're looking for in an initial debt package, how you're seeing term shift and kind of what tools you have at your disposal during construction and kind of post energization. Jonathan Mir: Good question. Thanks, Nick. So our basic approach is to compare and contrast our financing options down at the asset level and upstairs at the parent level. And certainly, one of the things that we've seen in the market that has caught our attention like everyone else, is the tightening of spreads between folks issuing high-yield debt in the market that would seem like quite attractive levels for strong investment-grade counterparties or credit wraps. And those converging towards the levels seen in bank-originated classic construction of project financing. So we'll be -- each of those has its own advantages in terms of simplicity of managing the actual capital once it's raised versus negative carry costs. And as we get closer to a funding point, we'll make the decision as to what seems best for our shareholders in terms of how we decide to finance. I'm sorry, Nick, I was just going to say that the markets for our space and for infrastructure generally seem calm right now. Operator: Our next question comes from Brian Dobson with Clear Street. Gregory Pendy: It's Greg Pendy in for Brian Dobson. Just I guess one final one. Just I guess, one final one. Just on the redomiciling to the U.S., are there any implications to costs or structural implications in terms of ownership that we should be aware of as you enter this over the next couple of days? Ben Gagnon: One of the benefits and reasons for the redom is that we will now be eligible for inclusion in indices that require -- want to be a U.S. domiciled company. So for example, we'll be eligible for inclusion in the Russell 1000 and the Russell 3000 as well as for ownership in any other fund who was otherwise limited to the purchase of U.S. securities. We view that as being quite helpful in terms of moving our shareholder base to one that is institutional and long term. There are no other -- there are no cost or flexibility implications in our end. We simply see this as a nice path forward with a lot of benefits for our shareholders. Operator: Our next question comes from Bill Papanastasiou with Chardan Capital Markets. Bill Papanastasiou: Just wanted to touch on the Washington side and decision to shift towards colo. Can you confirm that this won't have any material impact on the purchase commitment that was entered into November? Or is the team considering the shift in development allocation to other sites? Ben Gagnon: Thanks, Bill. No impact on the capital commitments and the equipment we've already purchased for the Washington site by changing business models. In fact, actually, it just helps to reduce the CapEx because we're no longer paying for the compute. Bill Papanastasiou: Understood. And then how should we generally be thinking about maintenance CapEx on existing Bitcoin mining sites as you gradually shift over to AI HPC here? Ben Gagnon: We're not making any investments into the Bitcoin mining sites. Basically, we're just continuing to keep them up and running. And so no further investments are being made in the sites into new sites or into new miners. Operator: Thank you. This concludes the question-and-answer session. I'd like to turn the call back over to Ben Gagnon for closing remarks. Ben Gagnon: Thank you very much, everyone, for joining our call today and really look forward to speaking to you next time as Keel Infrastructure. Have a great day. Operator: Thank you for your participation. This does conclude the program. You may now disconnect.
Operator: At this time, participants are in listen-only mode. Following management’s prepared remarks, we will open the floor for Q&A. Before asking a question, please identify yourself and the organization you are working for. Please also note the call will be recorded. Simultaneous English translation will be available for this call. You can select your preferred language by clicking Interpretation in the Zoom toolbar. Our December quarter and full year 2025 results were released earlier today and are now available on our investor relations website at ir.miniso.com. Joining us here today are Guofu Ye, our Founder and CEO, and Eason Zhang, our CFO. Before we proceed, I would like to refer everyone to the Safe Harbor statements in our earnings press release, which also apply to this call, as management will be making forward-looking statements. Please also note, we will be discussing certain non-IFRS financial measures today. These measures are described and reconciled to their most directly comparable IFRS measures in our earnings release, and in our filings to the SEC and the Hong Kong Stock Exchange. Unless otherwise stated, all figures are in RMB. In addition, we have prepared a presentation featuring financial and operational highlights for today's call. If you are joining via Zoom, you will be able to see the slides. They will also be available on our IR website. I will now turn the floor over to Guofu Ye. Guofu Ye: Good day, everyone. Welcome to MINISO Group Holding Limited’s 2025 December quarter and full year earnings presentation. 2025 was a year of steady growth and continued breakthroughs for the group. Throughout the year, revenue growth followed a strong and constantly accelerating trajectory, rising from 80.9% year-over-year in Q1 to 32% in Q4, surpassing the upper end of our prior guidance and also reaching RMB 6.25 billion in quarterly revenue, marking the first time we have crossed the RMB 6 billion quarterly revenue milestone. Looking at our core brands in detail, MINISO brand recorded its fastest growth rate in nearly eight quarters in Q4 with revenue up by 28%, reaching RMB 5.65 billion. Meanwhile, TOPTOY delivered exceptional momentum, posting 112% year-over-year growth in Q4, with quarterly revenue approaching RMB 600 million, demonstrating the powerful dynamics of our multi-brand portfolio. This year, we achieved higher revenue growth with fewer net new store openings than 2025, with a greater share of the growth driven by same-store sales, reflecting a more efficient and higher-quality growth model, reaffirming the resilience and the long-term growth potential of our multi-IP plus multi-category and globalization business model. Today, against the backdrop of the group's full-year operating performance, I will share with you the significant progress that we made in the past year regarding meaningful strategy, particularly focused on the breakthrough in brand innovation and store experience enhancement. First, let us take a look at MINISO China. In the fourth quarter, the MINISO brand generated revenue of RMB 5,650,000,000. Mainland China contributed RMB 2,870,000,000, growing by 25%, representing 51% of the total. MINISO’s overseas revenue reached RMB 2,780,000,000, up by 31%, accounting for 50% of the total, reflecting robust, balanced growth driven by both domestic and international operations. Let us first talk about strategic initiatives in MINISO Mainland China business. In Q4, MINISO domestic same-store sales grew by mid-teens, a record high for the year, with average daily sales per store surpassing the level achieved in 2023. Given 2023 was largely driven by a surge in post-pandemic pent-up demand, MINISO’s ability to exceed those peak levels demonstrates structural improvement rather than cyclical tailwinds. We have every confidence that, assuming a more supportive macro environment and a gradual recovery in consumer sentiment in 2026, with our stronger brand equity, superior store positioning, more agile supply chain, and competitive standing, we will be able to outperform the industry by a wide margin, capturing more share in the market. By the end of Q4, our domestic franchisee count reached 1,157, a historical high. Franchisees vote with their support. That is the most authentic market signal, and they partnered with us because they have witnessed firsthand the traffic momentum and the financial patterns of our large-format stores. The trust has been earned store by store, IP activation by IP activation. It is something that we hold in the highest regard. At our 2024 Investor Day, we articulated our vision to make MINISO the go-to happy destination for international consumers worldwide. Today, the vision has been realized, one MINISO Land store at a time. By the end of 2025, we had already opened 26 MINISO Land format stores in Mainland China, securing prime locations in tier-one cities like Beijing, Shanghai, Guangzhou, and Shenzhen, and also distinctive retail destinations in Haikou and Guiyang. In January, the MINISO Land opening in Grandview Mall in Guangzhou attracted nearly 10,000 visitors on its opening day, generating RMB 450,000 in sales, a new record for the South China region. Equally impressive is the MINISO Land flagship opening in lower-tier cities in Urumqi and Nantong. The Nantong store soft opening drove 80% year-over-year growth in overall mall foot traffic. Urumqi’s store, featuring a three-story impressive space and a portfolio of 100 IP collaborations, quickly established itself as a regional premier destination. Such high-quality experience stores are, at their core, the engine for IP operations. Through authentic spatial design and curated product presentation, mature consumer and sensory, perceivable and tangible experiences bring IP value to life. They can also help us continue to improve our brand IP ecosystem. MINISO Land stores combined with robust IP activations have become the go-to platform for creating citywide mainstream brand momentum. Tens of thousands of consumers share their experiences on Xiaohongshu, Douyin, and WeChat Moments. That is the reason I always tell you our physical stores are MINISO’s most powerful brand billboards and our most enduring source of consumer traffic. MINISO is not the first brand to pursue a large-format store trajectory. But why can others not follow? The answer comes down to just one thing: a successful large-format store must be built on the conditions of owning proprietary product development capacity. Without in-house design and R&D capacity, a large-format store is nothing but an empty shell. Behind that, we have more than one decade of supply chain deployment, a network of more than 1,500 global suppliers, and a design team of over 1,000 professionals. In this process, no one will be able to copy the successful story unless they build the core capacities. MINISO moved even further ahead. In support of our MINISO Land strategy, we established a seven-tier store format mix in 2024 and continued to refine and evolve it through 2025. Our goal is to ensure every city, every trade area, and every consumption scenario will be served by the MINISO format precisely. In the past, I mentioned the intention to systematically upgrade our store portfolio. I also would like to share with you the reason behind such initiative: why every new store we open must be a large-format, high-quality MINISO Land format store. If we look at our journey, we navigated two distinctive strategic phases: first, rapid global store expansion to build scale; followed by strategic IP positioning, transitioning ourselves from a value-priced variety store into an interest-driven consumption destination. We achieved milestones in both phases. Now we move into the third phase, an immersive retail transformation centered on MINISO Land. It is not only about increasing store size; it is the integration of the store capacities built across the first two phases. Leveraging larger space, creating immersive environments, forging genuine emotional connections, and driving repeated visitors, we are transforming from selling products to selling experiences, from a traffic-driven business to a loyalty-driven, consumer-centered one. People never lack good products. They are truly seeking compelling destinations, memorable experiences, and moments. With our IP-driven formats and designs precisely meeting those needs, we can inspire consumers to share and continue to come back to generate purchase. Regarding international markets, our overseas revenue approached RMB 2,800,000,000 in Q4, an all-time high, representing 31% year-over-year growth. Our overseas store net adds were 159 stores, bringing a full-year net increase of 465 stores. Our largest overseas market, the United States, delivered a full-year growth of more than 60% and in Q4, same-store growth was more than 20%, ahead of our prior expectations. At our Q1 2024 earnings call, I stated improving store operating quality in North America was our corporate priority in 2025. A year on, MINISO U.S. business delivered comprehensive improvements in store quality, operational efficiency, and consumer engagement. For stores, new store quality was further improved. New stores in 2025 have all-time high growth by double-digit numbers; average transaction value and transaction volume are improving, driving meaningfully higher unit-level profitability and conversion rates. At the same time, our mature stores demonstrated strong operating rigor. Leveraging a refined same-store performance tracking model, we established stores to deliver revenue growth in both average daily sales and transactions, improving alongside gains in foot traffic and purchase frequency, especially for our Plaza store format. We opened 48 Plaza locations in 2025. They generate higher attachment rates and average transaction value. The average ASP outperformed most of our estate, establishing a more flexible and economically resilient new store expansion channel. Operationally speaking, we have crossed the base expansion strategy, improving logistics efficiencies and warehouse cost. Employee retention improved, revenue per headcount increased, and labor cost as a percentage of sales declined, achieving a dual optimization on cost and productivity. On the consumer side, membership in the U.S. market grew by 150% year-over-year. Member-driven sales exceeded 50% of total revenue for the first time. Together, those results mark the U.S. market’s transition from a new investment phase into a phase of high-quality, profitable growth, becoming our most resilient and dynamic engine for global expansion. This actually gives us greater confidence for our global rollout strategy. The operational challenges we encounter in other markets were also encountered and navigated in both China and the U.S. We are going to leverage our experience from China and the U.S. to continue unlocking profit potential for international operations. Thirdly, let me talk about TOPTOY. TOPTOY sustained its strong compound growth momentum in Q4 with revenue up 112%, reaching nearly RMB 600,000,000 in Q4. In terms of store footprint, by the end of 2025, TOPTOY operated a total of 334 stores, including 30 international stores in Thailand, Malaysia, Indonesia, and Japan. Brand global expansion continued to accelerate. Domestically speaking, TOPTOY’s growth strategy is centered on a high frequency of proprietary product launches to drive same-store sales. The proprietary IP, Youyou, rapidly gained momentum with sales of more than RMB 200,000,000 and is likely to double in 2026. By 2025, TOPTOY has built a proprietary IP portfolio of more than 20 brands. In 2020, I first introduced interest-driven consumption. The consumer’s core needs are rapidly shifting from pure functional value to emotional and experiential value, which has been fully validated by the market. MINISO stands as one of the most significant beneficiaries and pioneers of this consumption transformation. With our immersive experience and multi-category proprietary development capacity, those are our key and hardest-to-replace competitive moats in the IP-driven consumption era. Our strategic vision is to become the world’s leading IP-driven retail platform. My strategy has been ever clearer. Along the way, we have demonstrated the execution of our strategic development is right. We also witnessed firsthand the genuine and sustainable enthusiasm we have from consumers. For the past year, we delivered strong results in both China and the U.S. The road ahead is strong, but with each step forward, our conviction and confidence only deepen. That is all for my remarks. I will now turn the call over to Eason to walk you through the financial highlights for Q4 and full year. Thank you. Eason Zhang: Thank you. Thanks to Mr. Ye. Welcome, you all. Coming next, let me walk you through MINISO Group Holding Limited’s financial results for Q4 and full year 2025. I will also provide you the outlook. I should also say that all the units would be RMB unless otherwise stated. Let me start by reviewing financial performance for Q4 and full year. In Q4, revenue grew by 32.7%, surpassing the upper end of our prior guidance of 20% to 30%, driven by the outperformance across all business segments. MINISO Chinese Mainland Q4 revenue grew by 25%, exceeding our prior guidance of high-teens growth. MINISO’s overseas Q4 revenue grew by close to 31% year-over-year, ahead of our guidance of low- to high-20s percentage growth. TOPTOY Q4 revenue grew by 112%, above our guidance of 80% to 90% growth. Q4 momentum lifted full-year group revenue growth by 26.2%, exceeding our prior full-year guidance of approximately 25% in the interim result. In Q4, MINISO Chinese Mainland net and same-store sales growth reached mid-teens. U.S. same-store sales exceeded 20%, both surpassing our prior Q4 guidance of lower double-digit same-store growth. Both markets delivered high single-digit same-store sales growth for the full year, in line with our formal guidance but ahead of the internal expectations we had when we provided the guidance back in November. Adjusted operating profit rose by 12% in Q4, in line with our prior guidance of double-digit growth. Full-year adjusted operating profit reached RMB 670,000,000, aligned with our guidance. In Q4, our adjusted operating profit margin was 17%. Especially in 2025, we have already narrowed down the margin compression. Let us take a look at revenue. We have already created three revenue milestones in this quarter. First of all, single-quarter GMV exceeded RMB 10 billion for the first time. Quarterly revenue surpassed RMB 6,000,000,000 for the first time, and full-year revenue crossed RMB 20,000,000,000 for the first time, benefiting from outstanding performance across all of our business lines and over expectations. By brand, MINISO generated Q4 revenue of RMB 5,650,000,000, a 27.7% increase. MINISO China continued to demonstrate great growth. In Q4, its average growth is the highest for the past eight consecutive quarters. MINISO overseas revenue was RMB 2,780,000,000, up by 30.5%. TOPTOY revenue was RMB 600,000,000, up by 112%, also having a triple-digit year-over-year growth with very strong momentum that exceeded our expectations. Turning to the full year, group revenue reached RMB 21.44 billion in 2025. A few highlights I would like to share with you: MINISO Mainland China full-year revenue crossed the RMB 10,000,000,000 milestone for the first time. In such a consumption background, it grew by around 70%. Overseas full-year revenue was RMB 6.86 billion, up by close to 30%. TOPTOY full-year revenue was RMB 1.9 billion, maintaining very strong growth. In terms of geographic revenue mix, Mainland China revenue grew by 22%, accounting for 60% of total revenue. Overseas revenue grew by 33%, representing 40% of total revenue. Let us take a look at the same-store sales performance. MINISO Mainland China Q4 same-store sales continued sequential acceleration reaching mid-teens, beyond our expectation. Looking back to the full-year trajectory of MINISO China same-store sales: from a negative mid-single digit in Q1 to positive low single digit in Q2, to high single digit in Q3, and finally mid-teens in Q4. Sequential progression delivered mid-single-digit same-store growth for the full year, already exceeding our initial target in 2025. As I have already shared with you, delivering the improvement in domestic same-store sales required many hard efforts. In terms of internal management, same-store performance has been built into KPIs. We also have the digital infrastructure making the business flow more digital and intelligent to improve one-team empowerment. Operationally, we improved store SOPs with supply chain optimization, ensuring sustained contribution from top-selling SKUs and minimizing potential sales losses. The product development efficiency has been further improved. We actually have more contribution from new SKUs and speed-to-shelf of new product launches. Lastly, inventory was kept healthy. Regarding operations, we are also working on three fronts including consumer, product, and channel. For consumers, we improved in-store conversion. Our extensive store network serves as a large-scale testing ground and rich data pool. By deploying additional foot-traffic counters, we are able to capture high-frequency store-level data that help to further optimize our store and operations. We also have diversified marketing activations. For example, this year, we have the One-Day Store Manager program on RED, outdoor street pop-ups, as well as in-store meet-and-greet signing events and celebrity store visits, which became viral moments on social media, driving organic brand amplification through fan engagement. Regarding product, let me give you two points. We capitalize on seasonal and holiday product trends while at the same time managing IP and non-IP merchandise with profound understanding. We leverage the traffic-driving power of IP products to generate attachment purchases and lead the basket contribution of non-IP items. Regarding channel, we improved our existing store portfolio. We upgraded and improved 300 stores with tangible results. Regarding MINISO overseas, same-store sales performance differs from region to region. First of all, in Asia and in Latin America, same-store performance lagged behind other international markets. However, our strategic direct-operated markets, the United States and Europe, delivered very good results. Especially our key strategic direct-operated market, the U.S., delivered low-20s percentage same-store growth in Q4, supporting our previous guidance. We are driven by a strong end market and continued polish of our stores. You can also see healthy improvement of same-store profit margins. Through disciplined dollar-driven site selection and cost-based store opening approaches, U.S. back-end overhead costs declined by low single digits, providing further tailwinds to U.S. business profitability. It is also worth noting that in 2025, the U.S. business faced meaningful tariff headwinds. Against a backdrop of significant macroeconomic uncertainties, our team responded with exceptional foresight, sharp market insights, and agile execution, and still delivered standout results. Such results validate our robust business model. Such strength in and out is actually the foundation for our confidence to navigate economic cycles. Where the domestic market, as our strategic home base, delivered sequentially accelerating positive same-store sales growth in a highly competitive market, which demonstrates our strategic model and exceptional execution capacity of the team, creating a favorable spot for further growth. In 2026, successful stories and playbooks from China and the United States will be exported to Southeast Asia. With respect to the challenges in Southeast Asia, we believe the headwinds already met the bottom, and in 2026, through comprehensive upgrades of our channel strategy, product assortment, and organizational structure in Thailand and beyond, we will be able to continue to improve the business in Southeast Asia. Regarding stores, total store count approached 8,500 by the end of 2025. In Mainland China, the net adds were 182 stores compared with 460 in 2024. Recall, MINISO Mainland China revenue growth was around 10% in 2024; however, in 2025, it was close to 70%. In other words, with a clear indication that we have transitioned toward a higher-quality and more-productive growth model with fewer net new stores. MINISO overseas net adds were 465, bringing the year-end total to 3,583. TOPTOY net adds were 58 stores. TOPTOY started global expansion in 2024; within one year, we have 30 stores internationally, present in Malaysia, Indonesia, Thailand, Japan, and Macau. By the end of 2025, our domestic MINISO Land format store portfolio included 26 destinations across 90 cities nationwide. The large-format and flagship stores collectively accounted for 10% of our domestic store count, yet contributed nearly 20% of our domestic GMV. This number will continue to ramp up, which helps validate that big stores drive speed, results, and margin. In 2026, we will accelerate the release of this momentum. You will see locations including SDF in Sanya, David City in Zhengzhou, and Grand Gateway Plaza in Shanghai continue to come online. In 2025, we opened our first overseas MINISO Land at Samyan Mitrtown in Thailand with very strong market reception, which helps us understand the substantial potential of our overseas formats. In 2026, we will continue to bring the immersive brand experience to more retail destinations across the world. For our overseas directly operated markets led by the United States, we plan to have strategic new openings before Q4, so that Q4 will be fully concentrated on in-store operational excellence and experience optimization. When the peak shopping season arrives, we will be able to fully maximize the growth momentum. Regarding gross profit margin, it was 46.4% compared with 47% in the same period last year. For 2025, the GP margin was 45%, flat. For the past five years, our GP margin jumped from 28% to 45%, driven by our brand innovation, globalization, and IP strategy. During the year, we made selective gross margin adjustments across product categories, which enabled better sales performance and overall increases in GP margin. In the near future, we are going to continue to manage the balance between margin rate and sales volume, maintaining healthy, high-quality growth. Regarding operating expenses, operating expenses in Q4 grew by 45.3%. Sales expense grew by 47.4%, 3% higher than the same period last year. Administrative expense grew by 36.3%, accounting for 5% of revenue, flat with last year. The increase in sales expense was attributable to the growth in direct-operated store costs, licensing fees, and advertising and marketing expenses. First of all, our international expansion is still in the early stage. Direct-operated stores need rent and manpower, which was 1 percentage point higher than the previous year, accounting for 40% of total revenue, with the total cost growth at 40%. However, it is already a deceleration from the 54.5% growth rate in the first nine months of 2025. Secondly, license fees grew by 107% year-over-year, accounting for 3% of revenue, up by 1 percentage point compared with 2024. This also reflects our proactive upfront investment in IP strategy. Thirdly, advertising and marketing expense grew by 30%, slightly below the rate of revenue growth in Q4, with the ratio to revenue remaining flat compared with 2024. The increase in A&M then led to adjusted operating flow. Q4 adjusted operating profit grew by 7.7% and adjusted operating profit margin reached 17%. For the full year, adjusted operating profit, no matter on an M/M or Y/Y basis, continued to be well managed. From the P&L perspective in Q4, GP margin declined by 60 basis points because Q4 2024 was our highest GP margin quarter on record, and also direct-operated store cost ratio increased by 1 percentage point, licensing fee ratio increased by 1 percentage point, with a further contribution from miscellaneous items of a few tens of basis points, resulting in a total adjusted operating margin impact of 3 percentage points. For the full year, GP margin was flat versus 2024, mainly due to the direct-operated store ratio increasing by 2 percentage points, licensing and other fees increasing by 1 percentage point, resulting in a 3 percentage point impact. At the same time, you can also see that in Mainland China, from the business unit perspective, the China franchise business saw a margin decline by only basis points against a backdrop of approximately 70% revenue growth, reflecting our conservative approach for gross margin in exchange for healthy volume. At the same time, the growth was also contributed by our super warehouse and e-commerce operation, with a modest dilutive effect on margin. The group-level margin decline was primarily attributable to compression in overseas margin. For example, direct-operated store revenue as a proportion of total gross overseas revenue increased from one-third in 2024 to more than half in 2025. Outside of North America, other directly operated markets remain in the early investment phase and carry lower margins. By contrast, our overseas agent and franchise revenue, which carry higher margins, grew at a relatively slower pace. In our financial statements, we also have some non-IFRS adjustments. There are five points. First, share-based compensation (SBC) was RMB 150,000,000 in Q4 and RMB 370,000,000 for full year 2025, which used to be RMB 85,000,000 in 2024. The increase was mainly because of the equity incentive plan we made for the team. The second is the loss from the derivative fair value changes and the CB issuance cost. The third is the interest expense on CB and the YH investment-related loans. In Q4, convertible bonds interest expense was RMB 51,000,000, of which RMB 47,000,000 are non-cash. Interest expense on the acquisition loan related to YH was RMB 24,000,000. In 2025 full year, the convertible bonds interest expense was RMB 190,000,000, among which RMB 170,000,000 were non-cash interest; on the YH acquisition loan it was RMB 867,000,000. The fourth point is share of YH post-tax loss. In Q4, YH’s net loss was RMB 1,840,000,000. Fifth, we also had fair value changes of the redemption liability arising from preferred shares. The change was related to RMB 150,000,000 to RMB 160,000,000, related to the strategic financing completed last year. In aggregate, the adjustments impacted approximately RMB 900,000,000 in Q4 and RMB 1,690,000,000 for the full year to arrive at adjusted net profit. Excluding the items discussed above, the adjusted effective tax rate was 20.2% for Q4 and 20.1% for full year. Q4 adjusted net profit grew 7.6%, reaching RMB 850,000,000. However, as a result of our active share repurchase and consolidation program, our adjusted EPS grew slightly faster. The adjusted diluted EPS in Q4 grew by 9.4%; full-year reached 7.8%. Regarding working capital, by the end of 2025, inventory turnover was 100 days versus 91 days in the same period last year. In Mainland China, inventory turnover was 74 days. Internationally, inventory turnover was 228 days. The increase in overseas inventory days reflects strategic inventory built ahead of the anticipated tariff impact, booking the cost at favorable levels. We also established local direct sourcing that can help finance inventory pressure and ensure continued new product replenishment. In the near future, we will also adjust our overseas inventory and overall efficiency. By the end of 2025, our cash reserve was RMB 7.1 billion, remaining healthy. In 2025, full-year net cash generated from operating activities was RMB 2,580,000,000, accounting for 90% of full-year adjusted net profit, a reflection of our business’s high earnings quality and strong cash generation. On capital allocation, we will maintain our commitment to rapid business growth. In 2025, we obtained a waiver from the Hong Kong Stock Exchange to repurchase up to RMB 1,800,000,000. We continued repurchases to showcase our commitment and confidence. Looking at 2025 full year, returns to shareholders accounted for RMB 1,900,000,000, about 66% of full-year adjusted net profit, including RMB 540,000,000 in share repurchases and RMB 1.36 billion in dividends. The Board has announced a final dividend of RMB 810,000,000, representing 50% of second-half 2025 adjusted net profit, which is expected to be paid in April. Last but not least, closing remarks and outlook. Looking back at our financial performance over the past five years from 2021 to 2025, revenue CAGR reached 21% and adjusted net profit CAGR reached 44%. Looking to 2026, we expect group revenue will have a high-teens growth rate; three-year CAGR from 2023 to 2026 would be no less than 22%. We expect same-store sales to continue to ramp up. In 2026, same-store sales in key markets like China and North America will maintain healthy low single-digit growth. We plan to have net new store adds of 510 to 550 for the full year, sticking to quality rather than quantity. In 2026, we will balance growth and efficiency, pursuing profitable growth and profit backed by strong cash flow. We expect both adjusted operating profit and adjusted net profit will accelerate their growth rates in 2026. In terms of seasonality, the peak rate season for offline retail in North America and Europe is in the second half of the year. For many Western offline brands, 60% to 70% of annual revenue is generated in H2. Our direct-operated revenue from North America and Europe will continue to grow. Around 60% of the revenue is expected to come from H2, and H1 to account for 40% of total contribution. In 2026, revenue growth will be no less than 25%. China same-store sales will maintain high single-digit growth. North America same-store will deliver strong mid- to high-double-digit growth. It is worth noting Q1 profit will include a significant investment gain from specific investments. It was generated from a test investment we made a few years ago. The company is quite positive on AI. We invested in an AI company. That company has been IPO-ed. The company’s share price appreciated, generating a substantial fair value gain, bringing us an extra RMB 850,000,000 to RMB 900,000,000. It is worth noting that such gains will not showcase our primary business. We plan to exclude this item from adjusted operating profit and adjusted net profit. That is all for our prepared remarks. We will now open for questions. Operator: Ladies and gentlemen, please change your Zoom display name to include your institution name. In order to accommodate more analysts and investors, please raise no more than two questions each time. Thank you. First, let us welcome Michelle from Goldman Sachs, please. Michelle (Goldman Sachs): Hello? Mr. Ye and Eason, thanks for giving me the chance to raise a question. Congratulations on the company achieving such nice growth in a volatile market. I have two questions. First, regarding the domestic market: last year, we drove solid same-store sales growth through refined store operations, stronger faster sales execution, and store network upgrades. Looking ahead to 2026, as Eason has already provided guidance, is it possible for you to be more elaborate on the key levers to drive further same-store sales improvement? The second question is regarding the U.S. market. We do notice the sales were looking right in the United States market. However, localized sourcing would somewhat pressure your GP margin. What are your priorities for merchandise supply chain and store expansion this year? What is the expected impact on margin improvement? That is the two questions I have. Thank you. Guofu Ye: Thank you. Our core levers for driving domestic same-store sales in 2026 are clear. There are three: the right IP, for example the Jennie co-branded product, which can help to further consolidate our revenue and brand impact; the second one is the right product; the third one is the right experience. Regarding the right product, we attach equal importance to product quality and ASP, and we also open large stores to provide full customer experience. You can also see that the Jennie collaboration was first launched exclusively at MINISO Land and select pop-up locations, creating a fully immersive IP experience. The limited-time pop-up at Hong Kong Plaza in Shanghai generated RMB 2,200,000 in sales on the opening day, setting a new single-day record for any MINISO in 2025. This not only validates the extraordinary power of our Land format store as a primary destination for IP launches, it also demonstrates a fundamental truth: prime offline experience combined with top-tier IP content is the golden formula for unlocking global consumer demand and maximizing IP value. As many of you may know, Hong Kong Plaza is a top shopping mall, which is quite influential, and all these stores and brands are super luxury brands. We were able to move into such department stores to launch our IP product. This represents recognition from the top shopping malls and recognition from top, valuable consumers. At the same time, breakout IP products expand our customer reach beyond existing audiences, elevating average transaction value and strengthening repeat purchase behavior. Together with our store operations, they form a powerful virtuous circle. Enhanced store formats provide superior showcases and a vibrant environment for IP, while IP products, in turn, provide targeted and highly loyal customer bases, jointly driving sustained high-quality same-store sales growth. For us, IP business is never purely about selling product. We have sought to leverage MINISO’s global supply chain capacity, category development, equity, and omnichannel reach to give every great IP and every talented creator a bigger stage, and to build more enduring IPs that stand the test of time and earn long-term consumer affection. The Jennie collaboration is a new area we are tapping into, working with internationally well-known celebrities. In the past we had image IP and content co-IP; however, the collaboration with Jennie showcases a new co-branded IP with CDPR release, which provides ample room for future cooperation. You see that for one of our peers, they had a collaboration with Lisa which brought extraordinary global value. Working with celebrities, we will be able to continue to improve and maximize IP value. They are all world top artists and KOLs. At the same time, I would also like to share with you, based upon our latest operating data, we expect domestic same-store sales growth in Q1 will be quite aggressive. In 2026, we hope that we will deliver more surprises. We hope more investors will keep a look at that and our working with more celebrities in the near future. The second question you asked about is product and IP strategy. We will continue to deepen our dual-engine approach of top-tier IP collaboration plus local market adaptation. On one side, we will intensify our partnership with leading global IPs. On the other side, we will further expand our assortment in high-margin categories like home goods, plush, and blind box. Just now you mentioned the U.S. market. In terms of local direct sourcing, we will optimize our SKU architecture to focus on high-velocity and high-margin items, achieving a better balance between scale expansion and GP margin. I just traveled back from the United States. In 2026, we are going to have a more precise analysis on what products need to be sourced locally, and what need to be shipped from China. Sometimes sourcing from China represents higher margin. In 2025, due to volatile tariff policy, we actually already left some room for local sourcing. However, in 2026, we believe tariff turmoil has already gone. We will be more certain and clear on what will be exported from China to the U.S. and what will have localized sourcing. Regarding margin, let me be frank. At the procurement and headquarters sourcing level, we need to further improve our efficiency, optimize the merchandise mix, and then improve the GP margin structure as a whole. Our target is to further improve operating margin in 2026, with a more pronounced recovery expected in H2 of the year. We provide a six-month buffer in H1 of this year. We believe H2 of 2026 will be great, including our Land store format. Internally, we keep a look at increasing ASP and also the price per item. We are working very hard to further improve ASP as well as per-product GP margin. Thank you. Operator: Thanks to Mr. Ye. Coming next, let us welcome Samuel from UBS. The floor is yours, Samuel. Samuel (UBS): Thank you. Thanks for giving me the chance to raise a question. I am Samuel from UBS. I have a few small questions. First, Mr. Ye, in your prepared remarks, you mentioned something regarding IP. I would like to ask you regarding your proprietary IP. What is the progress on proprietary IP? What are the sales targets and the strategic plan for 2026? What are the key third-party IP priorities? Anything you can share with us? My second question is regarding overseas markets, specifically the Mexico market. In 2025, Mexico faced headwinds. What is the outlook for 2026? My final question, I would also like to ask Eason. You mentioned you invested in an AI company. Can you disclose the name of that company? Thank you. Guofu Ye: Three good questions. Let me respond to the first one. First of all, let me talk about our IP, starting with Youyou. With less than six months of its launch in 2025, Youyou has already surpassed revenue of more than RMB 100,000,000. From January to March 2026, Youyou-related sales were already RMB 165,000,000, around RMB 50,000,000 per month. According to this trend, in 2026, for Youyou only, our sales will be RMB 600,000,000. If we also combine the international market, it is going to be RMB 800,000,000 or even RMB 1,000,000,000, likely to hit the RMB 1,000,000,000 revenue milestone. The revenue was beyond our expectation. Youyou is actually a Chinese proprietary IP. If you take a look at our IP portfolio, Youyou is the first one to have revenue exceeding RMB 100,000,000; it took less than six months. There is no other Chinese proprietary IP that could ramp such revenue growth as fast as Youyou. It truly demonstrates our product and IP operation tactics and strategy and our robust confidence and operations of IP management. As we are working on that, we will be able to deliver faster growth. In terms of product approach, we will carry forward the successful logic. We will define the structure and landscape for the designer toy market, maintaining category innovation as a primary driver of IP growth. All three product generations of Youyou released outstanding commercial results. The first generation remains most popular; till now, the average transaction value is still about RMB 400, and the third-generation product demand goes beyond our supply. At the same time, we are also clear that product sales are not the only dimension of IP management. We place greater emphasis on healthy, sustainable development of our IP. We will not sacrifice IP longevity for the sake of short-term sales revenue. I believe 2026 will be a great year for Youyou. We are very likely to have more products working with internationally outstanding IPs. For example, IPs from the Disney family are going to have a co-branded wave with Youyou. That is how our proprietary IP works with international IP for co-branding. Up to now, we have completed a full pipeline of 30 to 40 proprietary IPs. Among them, we have IPs from South Korea, Japan, and Thailand, and from all parts of the world. Especially Kumado, Chiba, and Chuchu have completed the full proprietary process from creative design to product readiness, and they will be introduced to global consumers in the months ahead. Through those pipelines, we aim to fundamentally reshape market perceptions of the MINISO IP category and product potential, creating more robust IPs that deeply resonate with consumer needs. I also would like to tell you, on May 17, we are going to have the MINISO Photo Gallery put into operation in Shanghai. That is going to be another key artist we are going to work with. That artist’s one painting masterpiece can sell for tens of millions of RMB. When our MINISO art gallery is put into operation, we are going to engage more audiences to work with us. Reflecting on what led Youyou to break through successfully, I think we did three things right. First, we constantly held to our core conviction of category innovation to drive explosive IP growth. Product innovation is quite important. The first generation of Youyou is outstanding. The success of Youyou readily allows us to recalibrate our direction for product innovation and how category innovation will be for the IP business. MINISO has been deeply dialed into the industry for many years. We have built world-class capacity in multi-category product development and adapted to consumer insights that help us rapidly convert a creative IP concept into best-selling products. Secondly, we work on IP narrative first and product commercialization second, ensuring that IPs develop their own soul and emotional resonance with consumers before products are launched, to crystallize the value, not the other way around. Thirdly, we build a fully integrated, end-to-end closed loop from upstream creative ideation to back-end supply chain to all the omnichannel distribution, enabling rapid response to consumer demand and efficient product iteration and launch. The IP incubation model is also the way that underpins our future capacity for next-generation blockbuster IPs. This is also a meaningful three-part competitive moat: world-class category development capacity, early-stage IP potential detection capacity, and high-momentum multichannel global distribution capacity. Those are the three strengths that will continue to empower the growth of our OIPs. As you may already note, our flagship and new Land format stores have many Youyou installations. That is quite important for IP promotion. You know that we have a store in Causeway Bay, Hong Kong. When we did not have our proprietary IP, we could only showcase Disney IP. Next month, we are going to have the Youyou artist installations at that store. For any IP, you have to make sure you expose the IP, especially your proprietary IP, at the store. That is our unique advantage of over 8,000 stores worldwide. With installations and Youyou’s presence in the store, that will be the best way to promote the IP at our own stores and make it visible and touchable by the consumer. The third point regarding the third-party IP and proprietary IP portfolio, I have nine words: more IP, more portfolio, globalization. In other words, we need to have global licensed IP plus proprietary IP. International IPs have their advantages. Some already have movies, well-curated content, and strong fanbases. Proprietary IPs also have the attribute of scarcity. If it is only a MINISO proprietary IP, it will protect our business strengths. By having international IP plus proprietary IP, that would be the best business combination. As we are working together, we will be able to make sure we have a stable business and more work to be done. For example, recently, we have the Jennie collaboration and we saw the Instagram movement on WeChat and Xiaohongshu a lot. If it were linked only to proprietary IP, I do not think the popularity would be that good. That is the reason I believe multi-IP, multi-category works for sure. Improving consumer experience also contributes to business stability in the long run. We need to be forward-looking rather than short-sighted. We must fully validate that third-party IP plus proprietary IP is the golden formula. We hope you can see after two to three years whether my words will be validated by the market or not. Till now, we also contracted some incubation of independent original artists and we are also incubating IP projects. Starting from 2026, in 2027 or beyond 2028, our proprietary IP development is going better. From the financial performance standpoint, proprietary IP outperforms third-party IP on gross margin contribution, owing to stronger consumer loyalty, pricing power, and absence of licensing cost. Third-party IP, in turn, provides powerful complementary benefits in new customer acquisition, audience expansion beyond our existing base, and also provides us very good content marketing advantages. The two are highly synergetic, together driving sustained and high-quality growth of our IP-related business. You know that for MINISO, the brand impact continues to ramp up. Many international IPs proactively approach us to work together. Even Jennie, the international top artist, worked with us. Jennie has a nickname as Miss Chanel because Jennie is the brand ambassador for many luxury products. Jennie has been happy with MINISO because of our strong brand and customer experience. Let me now attend to the question regarding the Mexico market. I just came back from Mexico. I am fully confident in that market. I believe it is going to be better in the near future. Mexico is going to be top three in the global arena. I met face to face with the GM of Mexico. We need to do brand operations in Mexico and develop the Land store format. We need a mix of Land and franchise stores. The top 100 shopping malls in Mexico should have GFA more than 800 square meters. In that way, the Mexico market will see explosive growth. You know that I went to Mexico and they have 100 Zara stores. All those stores have been taken in good shopping malls. Mexico’s landscape is very much like China. Their GDP per capita and the consumption structure are very much like China, with lower manpower cost. Mexico is actually in the best time for offline business development. We hope Mexico could become a benchmark market we have in Latin America. When Mexico thrives, the Latin America market will be driven. We are fairly confident in the Mexico market, and we have high expectations. We now define Mexico as our benchmark market. We will spend more effort and resources to make this market right. We have a very clear strategy for Mexico; same-store sales growth and future growth will be quite promising. My first point: you can see in 2026, Mexico will also have fast high-single-digit growth. However, it is still before the explosive growth of the Mexico market. It is still taking the old business model, old format. If they follow my line of thinking, a few stores could be transformed into Land or flagship stores. There is one store with Hermès, Chanel, and Dior as the neighborhood, and these stores should satisfy something unique rather than value for money. So I asked them to please close down that store and reformat it to sell popular IP and premium products. Mexico is often taken as a backyard of the United States. People come to Mexico who really want to shop something unique. We find Mexico is a market with great opportunities. We found that Mexico has a great array of high-quality shopping malls with very strong traffic flow. So we are not going to sell daily necessities. We are going to translate them into flagship stores, sell IP and trendy toys along with immersive experience, and drive interest consumption to improve ASP. I believe after Q2, Q3, and Q4, performance in Mexico will meet expectations. We will retrofit our stores and upgrade top 100 shopping mall locations in Mexico. I believe the performance of that 100 in Mexico will be doubled. The first question was asking about our investment. We were quite lucky to invest in a company named MiniMax. That is an AI company. MiniMax is being applied at our company very well, and I also would like to continue to work with MiniMax. We invested in MiniMax when they still had a very low valuation. Now the return is looking pretty good. So the name of that company is MiniMax. That is all. Okay? Operator: Thank you, Samuel, for your question. Due to time, ladies and gentlemen, please make sure you raise just one question per time. Coming next, let us welcome Renbo from CICC. Yanran Bo (CICC): Hello, Mr. Ye and Eason. Thanks for giving me the chance to raise my question. My name is Yanran Bo from CICC. Just one question from me. In 2025, it seems YH is pressuring your margin and financial statement. What would be your plan for YH business? Thank you very much. Guofu Ye: First of all, I need to clarify to all MINISO investors: my primary focus has always been and will always be MINISO. It is our foundation and the core driver of our future growth going forward, and it is also the foundation to make MINISO great. So you can be reassured 90% of my energy and time will be on MINISO. MINISO will always be my highest priority. My investment in YH will not distract my attention from that. Regarding YH, we have completed a management team transition with Wang Shouchen appointed as YH CEO. Under his leadership, YH has its own complete management team that is now independently responsible for the day-to-day operation and strategic execution of the business. Regarding YH’s future, we still feel confident. For MINISO and me, myself, I still would like to say MINISO will still be my highest priority, and it is also the cornerstone for the company to further expand and make MINISO truly great. I always notice the market development and momentum of MINISO is quite unique worldwide. We will seize the opportunity, continue to ramp up our business, and make MINISO great. Thank you. Okay? Operator: Thanks to Mr. Ye. Coming next, let us welcome Shu Di from Huatai Securities. Shu Di (Huatai Securities): Okay. Thank you. I am Shu Di from Huatai Securities. Congratulations on the company delivering a satisfying scorecard to the market, which is truly in line with refined operations. Mr. Ye, you have already introduced a proprietary IP strategy. We have already noticed in 2026 you take it as an operating year for proprietary IP. For the dimensional elevation for proprietary IP, what is the organizational structure of the proprietary IP team now? What pipeline and marketing initiatives should we look forward to in 2026? Thank you. Guofu Ye: We define 2026 as the evolution year for our proprietary IP. The foundational first step is the comprehensive organizational restructuring and level design of our IP business. We established a dedicated IP business group with full accountabilities across the IP value chain from creative incubation to product development to omnichannel operation. Our leader of merchandise has been placed into the IP business group. We are putting very experienced people to take the lead of the IP business group—the best and most capable people to run the IP business—so you can already notice how important IP business will be for MINISO. You can see that, directly, in many companies people are just using new managers to run new businesses. It is quite risky. We remain confident in our new business. We are using the most capable individuals to run the new business. That is what we do at MINISO. The most capable individuals and the capable team are running the new business, IP business, and that business is fully independent as a new business group. Regarding team build-out, we have completed targeted headcount expansion in IP operation, product management, and creative design, and we also established two new back-end R&D departments including CMF (color, material, finish) and ink and powder development. We are among a few companies that started to enter into material study. So for our trendy toys, we not only do IP, we also do product design and material study and color study and finish study, stressing that IP product manufacturing from supply chain building to product quality continues to consolidate the foundation for long-term IP growth. That is what we did in 2025. We will have the fabrics and raw material aspects, and we have a CMF unit that is established in Dongguan, very close to our headquarters. Regarding marketing and communication, we are working to build global IP influence through a diversified range of activations. For example, attending international art fairs and fashion weeks. On May 17, we are going to have the MINISO Photo Gallery put into operation in one of the best art centers in Shanghai. That also helps to showcase our standing within the artist community. For continued updates, we are going to have our own photo gallery not only in Shanghai, but also a new one in Hong Kong, because Hong Kong is actually the hub for global artists. We are going to build such photo galleries in Hong Kong too. By leveraging those photo galleries, we are going to engage the best artists worldwide, continue to ramp up collaborations, and also leverage KOLs to amplify our brand reach. Last year, for Credit Katy Kitty as well as other international artists, we started to work with them for marketing events. Even some of the short videos and secondary creations have been quite popular. There are many secondary creation contents of Youyou, and even within secondary incubation or content creation, Douyin is actually ranking number one among all IPs. The fans are quite active. Certainly, at retail we actually have IP-specific zones, translating brand impact into actual sales. In Guangzhou, we also have the Artist Street that is about 50 square meters GFA. We are going to allow new artists and new products to be showcased in those Artist Streets, having interactions with consumers. I believe that by so doing, we will be able to continue to scale our investment in proprietary IP incubation, creating an ecosystem and back-end R&D capacity. Our investment is for long-term healthy development of IP, not short-term traffic speculation. We focus on building high-quality IP that accumulates enduring brand value and generates sustainable cash flow, cementing a robust second growth curve for the company’s long-term future. That is our strategy now. In the near future, as we continue to improve our business capacity, we will have new IPs and new strategies to truly unlock the value of IP. Operator: Coming next, let us welcome Anne from Jefferies, please. Anne (Jefferies): Thank you. Mister Ye, thank you very much. I have a question for your SSSG. What is the current same-store sales performance? What about store expansion or site selection? And also the operating margin level in different markets, especially in the directly operated stores overseas. In the past, you were still in the investment stage. When are we going to expect operating return improvement? Thank you. Eason Zhang: Thank you. I am Eason Zhang. Let me help respond to your question. I think for the past 12 months, our growth philosophy is getting more clear: same-store sales growth as a foundation and new store expansion, especially high-quality ones, as incremental upside. Those are working in tandem. For SSSG, our 2026 goal to deliver a positive SSSG globally is quite challenging; however, we have ways to make it happen. Because in international markets, we still have some agent stores. It is not easy to make their growth positive. However, with good assortment, we have every confidence we will be able to handicap them. Regarding store expansion, I have already mentioned a net increase of 510 to 515 high-quality stores globally, with China and international markets serving as a twin engine for growth. In China, we plan net new adds of 120 stores; the majority of them will be the Land format and large-format stores. We will also close our underperforming small stores and continue to optimize the existing portfolio. In 2026, besides same-store sales growth, the high-quality new stores opened in 2025 and 2026 will contribute meaningfully in subsequent years as they mature. In China, we will still harvest good growth, but net growth will be only 120. In international markets, net store growth will be 250 stores, covering North America, Europe, Southeast Asia, and Latin America, deploying a combination of Land format flagship stores plus high-quality standard stores in prime retail destinations. As Mr. Ye mentioned, we need to move into the world-class business streets to improve the brand potential. Regarding North America, same-store growth already exceeded 20% in January and February 2026. We expect OPM to have a low single-digit improvement. In Europe, since the start of 2026, we see SSSG grow by double digits. Store expansion is progressing steadily. For example, in Poland, we opened two stores which are quite efficient working on 20 toys only, making lucrative profits. In Europe, we have another four direct-operated markets. Those are still in the early-stage investment. We hope OPM could be improved further. In Mexico, since the start of 2026, we see SSSG growth being a positive number, and we believe Mexico with the agent model still provides a stable operating profit margin. In Southeast Asia, we see some challenges. However, for MINISO, our business model is globalization. No matter if some markets have been challenged, we can leverage our global expansion to diversify our investment portfolio. We have some challenges in Southeast Asia; however, we are going to return to positive SSSG, working on Indonesia, primary locations, to have new stores. Overall, SSSG and OPM trajectory across all key markets remain healthy, which also showcases that we are still in a fast expansion and growth period. The key drivers are four: optimizing stores, product operations, scale expansion, and, lastly, well maintaining cost and expenses. Thank you. Operator: Thank you, Eason. Next question, let us welcome Madam Xu from CCB International. Please. Madam Xu (CCB International): Thank you. Mr. Ye and the management team, I have a question regarding the Southeast Asia market. Southeast Asia was the first start for international expansion. In 2025 I made a visit in Southeast Asia. The performance of Southeast Asia has been a concern of investors. What is the inventory in the Southeast Asia market? Are you going to adjust operations and product strategy there in 2026? Thank you. Guofu Ye: Regarding the question for the Southeast Asia market, I think in 2026 there will be a huge adjustment. MINISO started our global expansion ten years ago. We made major investments in Mainland China. In 2026, we are going to adjust four key markets: Thailand, Malaysia, Philippines, and Indonesia. In Thailand, we were quite successful and the Land format stores delivered tangible results. Indonesia is going to copy the Chinese model. Southeast Asia is quite close to China, and the consumption pattern is very much impacted by China. The lessons and success we made in China can help guarantee success in Southeast Asia. Recently, we went to Malaysia to have a MINISO Land store with very nice performance. In 2026, we are going to continue to copy what we do in China to key markets in Southeast Asia. I believe after the 2026 adjustment in H1, then in H2, Southeast Asia is going to provide you a good turnaround. We have a very clear and transparent strategy. We are going to execute it right. Madam Xu (CCB International): Thank you, Mr. Ye. No further questions from me. Operator: Okay? We are going to accommodate the final question. Jingyi Yang from Yangtze River Securities, please. Tina Yang (Yangtze River Securities): Thank you. Thanks to the team. Mr. Ye and the management team, I am Tina Yang from Yangtze River Securities. I have a question for you. Regarding the store renovation and upgrade program, is it possible for you to tell us what the strategy for 2026 will be? How many stores do you expect to renovate in 2026? What are the results from the completed renovations so far? Thank you very much. Guofu Ye: In 2025, we completed renovation for 290 stores. The results were highly impressive. Renovated stores’ average sales uplifted by 40% to 50%. The improvement is not attributable to a single factor, rather a simultaneous improvement of foot traffic, conversion rate, and ASP. They are all being improved. At the same time, rent as a percentage of sales has declined meaningfully. Staff productivity and sales per square meter are rising significantly. Single-store profitability has improved too. More importantly, you can see that last year, major landlords have been getting more supportive, and we also got greater support from landlords who are happy to provide better and larger locations to allow us to have Land stores and larger formats. With prime locations, cheaper rent has been provided. In 2026, with our proprietary IP development, some shopping malls and department stores are happy to present the best locations for us to do aesthetic IP exposure and IP presence. That can really showcase how the resources we will be offered. In 2026, we are going to accelerate renovation and adjustment. Underperforming stores will be upgraded and moved to prime locations. 2026 is a year for accelerated renovation. I have already mentioned in the near future 80% of stores need to be renovated and upgraded. With our proprietary IP development, in the near future our stores are going to be quite unique, quite differentiated, and they are going to be more influential in the landlord’s mind and be able to get good leasing terms. That way, I believe assets will contribute to our business growth and profitability in China. Thank you. Operator: Thanks to all the investors and analysts for your time for this conference. If you have any further questions, please reach out to the IR team. Thanks for your attention to MINISO Group Holding Limited. See you next quarter. Thank you.
Stocks suffered their largest monthly loss since September 2022, driven by the Iran war and a 53% surge in oil prices. Energy outperformed, while defensive and growth sectors faltered; tech giants like Nvidia, Meta Platforms, and Microsoft now trade at discounted P/E ratios.
Operator: Good afternoon, everyone, and welcome to NIKE, Inc. Third Quarter Fiscal 2026 Conference Call. For those who want to reference today's press release, you will find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I would now like to turn the call over to Paul Trussell. Thank you, operator. Paul Trussell: Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s Third Quarter Fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott J. Hill, and EVP and CFO, Matthew Friend. Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE, Inc.'s reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and nonpublic financial and information. Please refer to NIKE, Inc.'s earnings press release or NIKE, Inc.'s website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we would appreciate you limiting your initial question to one. Thank you for your cooperation on this. I will now turn the call over to NIKE, Inc. President and CEO, Elliott J. Hill. Elliott J. Hill: Thank you, Paul. Last quarter, we said we were in the middle innings of our comeback. Since then, we have continued to take meaningful actions to improve the health, quality, and foundation of our business. While we are not satisfied, I am confident that our progress in the areas we prioritized first through our Win Now actions point to where we are ultimately heading across our portfolio. Because of the scale and breadth of the NIKE portfolio, that progress will not happen all at once. We have approached this comeback deliberately across brands, sports, geographies, and channels, with some parts of the portfolio moving faster than others. One of the most important actions we took this quarter was further removing unhealthy inventory of our classic footwear franchises from the marketplace. That created roughly a five-point headwind to our reported results. It was intentional. It was necessary. And while it weighed on the quarter, it is improving the health of the marketplace, the quality of our revenue, and the foundation for more sustainable growth ahead. As we were removing unhealthy inventory, we focused first on the areas that create the greatest impact. We focused on our sport offense in Running, our largest performance sport, and in Football, the beautiful global game. We focused on athlete-centered innovation, building platforms that can scale across multiple sports and price points over time. We focused on our wholesale business, the environment where the majority of our consumers shop, where we needed to prove we could compete and win back market share. And we focused on paying it all off in North America, our largest geography that drives nearly half of our business. These are the dimensions that are furthest along, and each is absolutely essential to turning around this company. At the same time, other parts of the portfolio, including Greater China, Converse, and Sportswear, are still earlier in their comebacks. We have new leadership in place, clearer strategies taken straight, and structural changes underway designed to strengthen these businesses over the long term. We are moving with urgency. We are not simply fixing what needs to be fixed. We are building, brand by brand, sport by sport, country by country, partner by partner. We are reshaping our marketplace, rewiring how we operate, and investing in the technology platforms that we expect will help us serve more consumers better and run our business more effectively. These actions will continue to create near-term pressure, but we believe they are the right actions to strengthen NIKE for the long term and create more durable value for shareholders. This is complex work, and parts of it are taking longer than I would like. But the direction is clear. The urgency is real. And the foundation is getting stronger. By the end of the calendar year, we expect to have finished our Win Now actions. Aged inventory across the marketplace will be healthy, allowing our sports teams to consistently flow athlete-led, innovative, and coveted products in all sports across our three brands, including NIKE Sportswear and Jordan Streetwear. Our marketing teams will be creating even more locally relevant, inspiring stories in key countries and cities around the world. Our account teams will be elevating those stories and our brands at point of sale with consumer-right assortments and presentations, which will all result in more balanced, profitable, and sustainable growth across the integrated marketplace, owned and partnered, digital or physical. And because we are now far enough into the work and clear enough on the path ahead, this fall, we will share a more detailed long-term view of the business at an Investor Day at the Phil H. Knight campus in Beaverton. We look forward to sharing more about the future of NIKE later in the calendar year. Turning to the quarter. I will start with the dimensions that I consider to be progressing fastest in the comeback. NIKE Running was the first team to move into the sport offense. They created a clear product construct based on athlete insights, segmented and differentiated assortments across an integrated marketplace, and elevated our presence and storytelling at retail. The consumer is feeling the impact of the full offense, with NIKE Running up over 20% for the quarter. NIKE Running has created the roadmap for other sports to follow. Global Football is the next sport to fully transform into the sport offense. For the 2026 World Cup, it starts with our footwear construct that successfully launched the Tiempo in Q3, and we will unveil the new material in June. In apparel, we will deliver AeroFit kits for our competing NIKE federations, including a Jordan away kit for Brazil. We are also utilizing the World Cup as an opportunity to catalyze the Football marketplace for quarters to come. By the end of the tournament, we will have elevated our presentation in more than 5,000 Football doors around the world, with wholesale partners and NIKE Direct. Because winning in Football goes beyond winning the World Cup. We win through the clásicos, the derbies, and Copa, with colleges and youth clubs in every neighborhood, season after season. In innovative product, we are back to leading big ideas for our industry. In just one quarter, we delivered both footwear and apparel platforms with deep insights that leverage years of scientific research from our labs, owned IP, and advanced manufacturing. Our new NIKE MIND platform, with over 150 patents filed globally, was the highlight of the quarter. Designed to help athletes clear away distractions pre- and post-competition, the MIND won. Sold out. All geographies. We responded by doubling production of NIKE MIND over the next two seasons to meet demand from more than 2 million consumers who signed up for “Notify Me” on nike.com. Following NIKE MIND, we introduced several early-stage innovation platforms this quarter. We used NIKE Air for the first time ever as a self-inflated thermal layer in apparel, unveiled a new liquid Air Max platform that is low to the ground and moves naturally with the foot, and we delivered AeroFit for Football, our new elite apparel cooling platform that increases airflow by 200% over regular Dri-FIT. It will expand into multiple sports, including NIKE Running in the fall. These platforms are scalable foundations for growth that we can extend into multiple sports and price points over time. Recently, our leadership team reviewed our full innovation agenda for 2027 and 2028 by brand and by sport. That focus is showing up in sharper athlete insights and more complete head-to-toe solutions, and we are excited to share a vision for the future of sport with you this fall. And, yes, innovation sparks demand. But products alone do not deliver long-term growth. For years, we were running a NIKE Direct-first offense. Now we are rebalancing our offense through an integrated and elevated marketplace, and running a Key City offense. These moves require us to rewire our supply chain and upgrade our technology platforms. You saw the early signs of those actions this quarter, and it is a critical step in our return to double-digit EBIT margins. Many of our Win Now actions are being paid off first in North America. One of our strongest executions this quarter was the NBA All-Star Weekend, which connected us to consumers and drove full-price sell-throughs while deepening our wholesale partnerships in Los Angeles with Shoe Palace, Dick's, and Foot Locker. The experience set the tone for how we will show up in LA for the World Cup, Super Bowl, and the 2028 Olympics. Across all dimensions in North America, our wholesale momentum is accelerating. It is sporting goods. Dick's and Academy are leaning in with us to tell more sport performance stories. We are building long-term plans with Foot Locker and JD in athletic specialty. And we are fully committed to our partners in running specialty, Football specialty, and city specialty through our investments in product innovation and presentation. Ultimately, this is about creating a more profitable business model for both sides of the partnership. In NIKE Direct, we have elevated our own experiences, setting the standard for how our brands show up in the marketplace. We have intentionally cleaned the market in all channels. The teams are hyper-focused on consumer-right assortments and presenting them in environments that tell our best innovation stories, all with the goal of accelerating sell-through. If Running shows what our sport offense can do, North America shows the power of our complete portfolio in an elevated, integrated marketplace. From here, we expect that to translate into consistent growth in North America. I will finish with the areas of our business that are earlier in the journey, starting with our growing portfolio of emerging brands. This quarter, we tapped into the energy of the Winter Olympics in Milan and Cortina to build excitement around ACG. It was a world-class execution that showcased the ACG logo on all Team USA athletes. We executed creative brand marketing, including an experiential chain from Milan to the Alps called the All Conditions Express, and we elevated our presentation in more than 600 retail doors around the world, including a stand-alone ACG door in Beijing. The NIKE ACG team is committed to serving the outdoor athlete by creating the world's most innovative footwear, apparel, and accessories, building our presence authentically over time by supporting world-class racers and events, and building long-term partnerships with the retailers who authentically serve outdoor athletes. The outdoors is a tremendous opportunity for NIKE as we bring excitement and a fresh perspective to the consumers and the industry. In NIKE Sportswear and Jordan Streetwear, our teams are moving from playing defense to playing offense. Matt shared last quarter that by the end of this fiscal year, we will have intentionally reduced over $4 billion of revenue from the peak levels of classic footwear franchises. A cleanup of that scale is significant and has taken several quarters to execute. From here, we are investing in a more sophisticated city offense, one that incubates new styles through different consumers and channels, account by account. And as you know, there is both an art and a science to seeding, igniting, and scaling new Sportswear styles. A great example this quarter is the strong sell-through we drove around the globe with a more thoughtful approach to the reintroduction of the Air Max 95. That city-led approach is especially important in EMEA, where we lack a fully integrated marketplace and it has been one of our biggest hurdles. The team is responding with a more complete street-up model, working more closely with wholesale partners to improve point-of-sale storytelling and seeding in the community. In EMEA, you will see us show up more as a local NIKE. Greater China, too, will benefit from a more local approach and closer connection with the consumer on the ground. We have become clearer on the structural challenges in China and the channel dynamics in the marketplace. We are taking action to clean the marketplace, tighten execution across digital and physical retail, and rebuild the brand locally through sport. It will take time, but we remain confident that serving 1.4 billion potential athletes in China is one of the most powerful opportunities in sport. In Converse, the team took some decisive steps this quarter to bring the brand back to a healthy business. Converse is a beloved brand that serves a distinct consumer through their connection to creative culture, music, and youth. Converse will remain an important part of the NIKE, Inc. family, and we are excited about its long-term prospects. Overall, the work is not finished. But the direction is clear. Our teams are moving with focus and urgency, and our foundation is getting even stronger. I am going to pass it over to Matt, and I will come back on to close out the call. Matthew Friend: Thanks, Elliott, and hello to everyone on the call. As Elliott outlined, we are seeing real progress across the business. Our initial focus on sport was important because it sets a strategic repositioning of our brands. Momentum in Running continues to be strong, and we expect Football, Training, and Basketball to return to growth over the next few quarters. Yet sport dimensions currently represent less than half of our total portfolio, and Sportswear continues to be a headwind to revenue growth, as it declined low double digits in the quarter. In the marketplace, relationships with our wholesale partners are strong, and our ways of working look very different than they did 12 months ago. Order books are growing, and we are taking back shelf space. However, sell-through trends are not yet where we want them to be. Despite making progress versus a year ago, digital is still too promotional. Markdowns across the marketplace remain elevated. Our teams are pulling levers to manage inventory and protect brand health, but this continues to be a headwind to gross margin profitability. While our comeback is taking longer than we would like, we are confident we are on the right path, and we have a clear set of plans in place to complete our Win Now actions by the end of the calendar year. Now let me turn to our third quarter results. For this quarter, revenues were flat on a reported basis and down 3% on a currency-neutral basis. NIKE Direct was down 7%, with NIKE Digital declining 9% and NIKE stores down 5%. Wholesale grew 1%. Gross margins declined 130 basis points to 40.2% on a reported basis, primarily due to 300 basis points associated with higher tariffs in North America. SG&A was up 2% on a reported basis versus the prior year, due to employee severance charges we incurred in the quarter. We also had other income from legal settlements. Our effective tax rate was 20%. Earnings per share was $0.35. Inventory decreased 1% versus the prior year, with units down mid single digits. Let me provide some additional context on the $230 million charge we incurred this quarter due to employee-related severance costs, primarily in Supply Chain and Technology. During the pandemic, we accelerated investments across Supply Chain and Technology to support a larger digital and direct business. Those investments also resulted in a higher fixed cost base that weighed significantly on our EBIT margins as revenue came down. Given the strategic shifts we have made to serve a more balanced and integrated marketplace, we have begun to take meaningful steps to reset our cost base to improve NIKE's long-term profitability. Our specific actions in the Supply Chain will lower costs, streamline operations, and reduce capacity in our distribution network. Over time, we will shift our Supply Chain network to become more of a variable cost versus the higher fixed cost structure we have today. In Technology, we continue to optimize our workforce, rationalize programs, and leverage new advanced capabilities. We also right-sized operating costs at Converse this quarter, which was included in this charge as well. We continue to evaluate opportunities related to Supply Chain, which could result in additional financial impacts in future quarters. While we believe the actions taken this quarter will represent the largest financial impact, we expect benefits from these actions to begin in fiscal 2027 and continue to build through fiscal 2028. Now I will turn to performance in the geographies, including key highlights and actions we are taking to drive progress against our Win Now actions. In North America, Q3 revenue grew 3%. NIKE Direct declined 5%, while NIKE Digital was down 7%. NIKE stores were down 1%. Wholesale grew 11%. EBIT declined 11% on a reported basis. North America is leading our comeback and is well positioned to sustain the momentum as we move forward. Running and Global Football grew double digits, with Basketball up high single digits, while Sportswear declined double digits. Our digital business improved sequentially throughout the quarter, driven by strong launch and growth in key sports, as well as continued improvement in average retail discounts. Wholesale revenue growth was driven by new distribution and lapping marketplace management actions with existing partners in the prior year. While sell-through has been below plan, sell-through improved in February, and we drove positive growth in all channels in the geography for the first time in two years. Inventory dollars grew low single digits, while units were down high single digits, with the spread primarily due to tariffs. Closeout units remain low, and the mix is healthy. From a margin recovery perspective, North America gross margins declined 360 basis points versus the prior year, despite nearly 650 basis points of gross impact from new U.S. tariffs. Underlying profitability has now improved over three consecutive quarters, giving us confidence that we can recover the transitory headwinds to margin associated with our Win Now actions. And last, we are increasingly confident we are on track to return to balanced growth in North America across both NIKE Direct and wholesale channels in the near term. In EMEA, Q3 revenue was down 7%. NIKE Direct declined 13%, with NIKE Digital down 6% and NIKE stores down 20%. Wholesale was down 4%. EBIT increased 7% on a reported basis. EMEA presented both progress and challenges in the quarter, and the team continued to take action in a highly promotional marketplace. Our performance business continued to build momentum, led by double-digit growth in Running. Sportswear was down double digits, and sell-through has not tracked with sell-in expectations. Promotions across the marketplace were up versus the prior year as partners manage inventory. We were also more aggressive with promotions on NIKE Digital at the end of the season, which resulted in higher markdowns and a higher off-price mix. Inventory grew double digits versus the prior year, with units up mid single digits. Given the softness in Sportswear, traffic patterns, and promotions across Europe, as well as recent disruption in the Middle East, we anticipate ending the fourth quarter with elevated inventory. In Greater China, Q3 revenue declined 10%. NIKE Direct declined 5%, with NIKE Digital down 21% and NIKE stores up 1%. Wholesale declined 13%. EBIT increased 11% on a reported basis. This quarter, we made forward progress in Greater China. Running grew double digits in the quarter, and we also saw growth in Tennis, Golf, and ACG, and Kids was flat. Sportswear declined double digits as expected. Wholesale sell-in was managed down, while seasonal sell-through rates sequentially improved. We expanded our NIKE store pilot to 100 doors, including our House of Innovation door in Shanghai, obsessing store assortments, storytelling, and replenishment, and this resulted in traffic and comp sales improving versus the prior year. We implemented shifts to manage our brand presence differently across all digital platforms, pulling key styles off discounts, resulting in higher full-price realization for these styles. Inventory was down mid teens versus the prior year, with units down more than 20%, and partner inventory also declined double digits. With new leadership now in place, we expect to take additional actions to improve our position in the coming quarters. We will continue to reduce near-term sell-in to align with full-price demand, clean up the digital channel, and reduce the amount of aged inventory in the marketplace. We expect these actions will continue throughout fiscal 2027 and remain a headwind to revenue growth, while profitability should bottom sooner as marketplace management makes progress. In APLA, Q3 revenue was down 2%. NIKE Direct declined 8%, with NIKE Digital down 12% and NIKE stores down 3%. Wholesale was up 3%. EBIT declined 4% on a reported basis. In the quarter, we saw bright spots: Running up double digits and growth in Training and Football, while Sportswear declined double digits. We had a strong launch of NIKE Skims in Australia and Korea, and launched new Cricket footwear innovation at the T20 Cricket World Cup. NIKE flagship stores in Tokyo and Seoul drove positive growth for the quarter. While inventory grew high single digits versus the prior year, units declined low single digits, as the team made progress in certain countries. Closeout mix remains elevated, and the team is focused on the actions to address excess inventory over the coming quarter. We expect performance across territories in APLA to remain mixed in the near term. Now I will turn to our outlook. You heard Elliott say that while our comeback is taking longer than we would like, we have a clear set of plans in place, and we expect to complete our Win Now actions by the end of the calendar year. Over these next nine months, there will continue to be puts and takes across the revenue and gross margin lines of our business. At the same time, we are even more confident in where we are headed. Therefore, we want to provide greater visibility to how we see the business trend from here through the end of this calendar year. We expect revenues to be down low single digits versus the prior year, with gains in North America offset by declines in Greater China, driven by intentionally reduced sell-in and marketplace management actions over that period. While the tariff environment has been uncertain, assuming no significant changes, we expect Q2 fiscal 2027 to be the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin. We expect gross margin expansion to begin in the second quarter due to actions to mitigate tariffs and recovery of transitory impacts from Win Now. We expect earnings to be flattish with gross margins beginning to inflect and disciplined SG&A management, setting the foundation for earnings recovery from there. We also recognize that the environment around us has become increasingly dynamic, and we could experience unplanned volatility due to the disruption in the Middle East, rising oil prices, and other factors that could impact either input costs or consumer behavior. We are focused on what we can control, and these assumptions reflect the macro environment as it stands today. Now I will share a specific outlook for Q4 fiscal 2026. We expect revenues in Q4 to be down 2% to 4%, with modest growth in North America despite lapping a value liquidation in the prior year, largely offset by declines in Greater China and Converse. We expect Greater China to be down approximately 20% in the fourth quarter, reflecting reduced sell-in that we highlighted last quarter, as well as accelerated actions to clean up the marketplace. We anticipate a two-point benefit from foreign exchange. We expect sequential improvement in gross margin, with Q4 down approximately 25 to 75 basis points, including 250 basis points due to higher tariffs in North America. We expect Q4 SG&A dollars to be flat to down slightly. We expect other expense, net of interest income, to be an expense of $15 million to $25 million in the fourth quarter. And we expect our full-year tax rate to be in the low 20% range. And last, we will return to providing full-year and long-term guidance at our Investor Day in the fall. With that, I will pass it back to Elliott. Elliott J. Hill: Thanks, Matt. Before we move to your questions, I want to leave you with an image that stayed with me from this quarter. I was in Barcelona meeting with athletes and leaders from FC Barcelona, a partner of ours since 1998, and I stood on the pitch at Camp Nou. If you have ever been there, you know it is more than a stadium. It is one of the most imposing stages in sport, a place built for pressure, belief, and unforgettable moments. And right now, Camp Nou tells another story too. Above the pitch, there is scaffolding. In the corners, there are cranes. Entire sections are unfinished. The stadium is being rebuilt tier by tier, piece by piece, to accommodate over 100,000 supporters. The work is still underway, capacity right now is limited, and it requires patience and perseverance. And still, the supporters are in full voice. The players are still stepping onto the pitch, focused on competing and winning. And all around them, the work is transforming what their home, their club, will become. What stayed with me was the reality of both things being true at once: competing today while building for tomorrow. FC Barcelona did not choose between performing in the present and preparing for the future. They are doing both at the same time. Standing there looking up at the Hatfield Stadium, it occurred to me this is NIKE right now. We are taking deliberate actions that we believe will restore the health and quality of our business, even when these actions create pressure in the near term. We are removing what is not working. We are rebuilding parts of the foundation that needed to be rebuilt. And at the same time, we are continuing to innovate, to compete, and to create for the future. That takes conviction. It takes patience. It takes belief. And it takes focus. Camp Nou is being rebuilt not for the next match. It is being rebuilt for the next era. That is exactly how I think about the work we are doing at NIKE. I came back to help return this company to greatness and to build it the right way for the long term, to protect what has always made NIKE special, and to modernize it for a new generation of athletes and consumers. So while the work is not finished, the direction is clear. Our focus is clear. And our comeback is within reach. And this fall, we look forward to sharing a fuller view of that path ahead at our Investor Day. With that, let us open it up for questions. Operator: We will now begin the question and answer session. To ask a question, press star then the number one on your telephone keypad. We kindly ask that you please limit your initial question to one. Our first question will come from the line of Lorraine Hutchinson with Bank of America. Please go ahead. Lorraine Hutchinson: Thanks. Good afternoon. The performance in EMEA seems to have decoupled from some of the early successes you have seen in North America. How do you diagnose the problems, and what is the strategy to fix it? Matthew Friend: Well, Lorraine, as I highlighted, EMEA presented both progress and challenges in the quarter. And I think that as we have implemented the Win Now actions across that geography, we are seeing growth in performance. We are seeing Running up double digits, and we are really excited about the plans that we have got in place for the World Cup, as well as the way that we are setting up the marketplace for both upcoming product launches in both Running and in Training. This quarter, we highlighted that we did not see sell-in where we were hoping sell-in to be specifically on our Sportswear business, and it is really connected to a theme that we have been talking about for several quarters. We have highlighted some of the macro pressures that we have been seeing in EMEA over the last few quarters, and specifically that marketplace has seen challenges in traffic and also a higher level of promotional activity. And so this quarter, as we saw sell-through trending below our expectations, we saw our partners start to be more promotional, and we also were more promotional to manage inventory across this large marketplace. And this quarter, we also experienced traffic disruption from the Middle East, and we also are taking that into consideration as we are thinking about where this business stands and also as we look forward. So we have been aggressive, as I mentioned, with our teams pulling levers in order to keep this marketplace clean and healthy. Our closeout mix is at a really good level, and while we expect to exit the fourth quarter with elevated inventory in EMEA, we are confident, given the size of the issue and the way that our teams are responding, that we will be able to continue to work through the Win Now actions in this geography as well by the end of the calendar year. Elliott J. Hill: And, Lorraine, the only thing just to add to that, we do have a new leader in place. I have tremendous confidence in Cesar Garcia. He is a 25-year NIKE veteran. He has deep and broad product and market experience, and he is a tremendous leader. The team is really focused from a product perspective, and Matt touched on some of this, moving from being so Sportswear-reliant to also being really focused in on performance, where we have growth in Running, Training, and Football. So I like what they are doing there. They are now getting back to driving a more elevated and integrated market, and then they are focused on making sure we have the right assortments in those doors, elevating the presentation, and driving sell-through with our strategic partners. And so overall, I am really pleased with the actions that the team are taking. Operator: Our next question will come from the line of Adrienne Eugenia Yih-Tennant with Barclays. Please go ahead. Adrienne Eugenia Yih-Tennant: Thanks for the forward guidance, actually. That is my question. It is going to be so you are talking about the end of the calendar year, but your quarters kind of split the calendar year kind of in the middle. So I am wondering if we should be thinking about revenue, you said down low single digit for that horizon, with North America up and improving, which would suggest that Greater China is meaningfully negative, probably climbing from that negative 20. So just a little bit help there with the shaping and what is that? Is it February? The earnings being flattish would suggest, you know, 15% maybe haircut, you know, to where I mean, significantly more than where the Street is. So, again, is that flat for the fourth quarter on EPS through the February? And then should we think about the May of that year sort of having a big inflection? Sorry for all the kind of convoluted questioning, but thank you. Elliott J. Hill: Yeah. Adrian, I am going to jump in first. I see Matt wrote down all the questions, so I think he is ready. But here is what I want to make certain that everyone here is on the call. We are even more convinced now that the Win Now actions were and remain the right strategic moves. We have made meaningful progress improving the health, quality, and foundation of our business. We talked about that. And really, the areas that we said we were going to make the most progress, the ones that we knew made the most impact, are some proof points that the actions are working. If just at a high level to go through the actions, we first said culture was number one. We have the teams galvanized around sport and growth. Product was the second one. We are driving the sport offense. We just moved into sport offense in September. Spring 2027 will be the first quarter where we will have product flowing into the marketplace from the sport offense. And Running is a proof point this quarter. It is up double digits. NIKE Football is also getting back to growth. We have innovation coming. We talked about MIND and AeroFit. The wholesale business is back to growth. And we are paying it off in North America. So I am really pleased with those proof points that the Win Now actions are making an impact, and know that we are moving quickly against Greater China, Converse, and Sportswear. We have new leaders in place. We are creating thoughtful long-term strategies. And we are making structural changes. And what I want to leave you with before I hand it over to Matt is that these are deliberate actions. And we are not just fixing. We are building, brand by brand, sport by sport, country by country, and partner by partner. And I will acknowledge that parts of it are taking longer than I would like, but we believe in the direction. We are moving with urgency, and the foundation is getting stronger. So I feel great about that. Matthew Friend: And, Adrian, on the specific guidance question, what I would say is that we have been providing 90 days of guidance for the last five quarters since Elliott returned, and we have been consistently asked for greater visibility as we had confidence in the trajectory of the business. And, you know, while this comeback has taken longer than we would like, with North America's continued momentum and a clear plan in place through the remainder of the calendar year, our approach to providing guidance for the calendar year is really about pulling up at this moment and providing transparency to the financial trajectory of the business over the next nine months. So I think of it as it includes this quarter, and then it carries through over the next nine months. And we are lining that up with the timeline that we have set to complete the Win Now actions by the end of the calendar year. Specifically, your question about some of the elements of shaping, without getting into specifics of November versus December, what I would say is that we expect revenue to be down low single digits over this period. We do expect the momentum to continue in North America, and so we are planning for modest growth in North America, even as we continue to lap the value liquidation that we have been doing this year. That is going to be offset by headwinds in Greater China, and that is partly related to what we have been talking about, which is continuing to reduce the sell-in so that we would meet full-price demand, and also some of the actions that we are continuing to take in the marketplace in order to be able to clean it up. But I think the important point is that we expect margins to inflect, and that is a big moment, I think, in Q2 for us, as we have been navigating through the costs associated with the Win Now actions and dealing with the newly implemented tariffs. I think our confidence in margins inflecting positively in Q2, while we are managing SG&A tightly, really sets the table for inflection in earnings as we go from there. Operator: Our next will come from the line of Simeon Siegel with Guggenheim Securities. Please go ahead. Simeon Siegel: Thanks. Hey. Good afternoon, guys. Matthew Friend: Hey, sir. In the spirit of all this information, which, again, thank you. I know you guys do not normally give this detail, but any color you can share on DTC gross margins or just any way to think about the health of that channel? I know I have gotten a lot of questions around wholesale growth versus DTC declines. Just might be helpful to hear a little bit more about the quality of those DTC sales versus the reported declines, Elliott. And then, Matt, just could you quantify the severance booked into the operating overhead this quarter? The full $230 million? I am just trying to think through the change in operating overhead on a recurring basis, how you are thinking about operating overhead expenses next year as you further variabilize P&L? Thanks, guys. Elliott J. Hill: Yep. Thanks, Simeon. Let me jump in, and then, Matt, I will let you take the specifics around the DTC questions. But here is what I want to make sure that everybody on the call understands. We had been servicing our consumers with a direct-to-consumer model, and now we are moving to serve consumers wherever, however they choose to shop with us. We want to make certain that we are managing our business across a balanced and integrated marketplace. That is the strength of NIKE, when we are able to have a portfolio of places that we serve to consumers. And we are making certain that we segment and differentiate the assortments across multiple channels. NIKE Direct is certainly a part of that, but we are also making certain that we serve consumers in specialty sporting goods, athletic specialty, department stores, family footwear, and digital and physical. That is the power of NIKE, and I think we are doing a much better job of working directly with our partners, developing long-term plans, and making certain that we gain back shelf space and ultimately share. So again, yes, DTC is critically important to our success moving forward. I want to make sure you hear me say that. But, also, I want to make certain that you hear that an integrated and balanced marketplace is also critically important. Matthew Friend: And specifically to your question about the quality of the DTC business, what I would say, Simeon, is that North America is the geography where we saw the most improvement in the quality of the business in Direct, and specifically I am really talking about digital. We did, with our focus on sports, see strong results across our NIKE stores around the world, lining up against sport and getting behind key sport moments. But on the digital side in North America, we saw continued improvement in the gap between wholesale and Direct. And when we look at the quality of that business in North America, we continue to be encouraged. I mentioned a couple things on the call, but we saw sequential growth throughout the quarter driven by strong launch—that is across both NIKE and Jordan. We saw growth in key sports on digital, and we saw continued improvement in average retail discounts in North America. We saw demand on the NIKE app grow in Q3 in North America, and, as I mentioned, we saw sell-through overall in the marketplace in North America in February inflect up, and it was the first time in two years that we saw positive growth in all channels. So that includes wholesale and across Direct. And so we continue to be encouraged that as we are getting deeper into our Win Now actions, we are getting closer to balanced growth between wholesale and Direct in the North America marketplace. And that is the playbook that we intend to take, that we are taking, to Europe, to APLA, and to Greater China, and what we are focused on executing through the balance of the calendar year. Operator: Our next question will come from the line of Michael Binetti with Evercore ISI. Please go ahead. Michael Binetti: I guess just to clean up if the negative 2% to 4% in fourth quarter is reported or currency, and then I guess, bigger picture with revenues down 2% to 4% and North America growing modestly, China down 20%. You did not guide the EMEA in the fourth quarter, but it seems like triangulating somewhere close to down mid singles, down a bit, despite the World Cup. Maybe just the shape of the major puts and takes in EMEA in fourth quarter since the revenue rate changed so much in third quarter? And I guess the follow-up there is the margins in EMEA were surprisingly strong in third quarter despite the revenue decline. Could you just comment there on maybe any color on whether those positive offsets continue? Matthew Friend: Yeah. The comments that I made on EMEA in the third quarter definitely inform the way we are thinking about the fourth quarter. We expect to continue to see growth in the performance dimensions. We are incredibly excited about World Cup. I mentioned that we have got strong double-digit growth in Running, and we are excited about upcoming product launches in both Training and Running. Training is the second biggest performance category, and it is super important to continue to build momentum as we continue to drive our Training business across all sports. The real change in the quarter was sell-through on the Sportswear side. And so our outlook reflects a modification that takes this into consideration in terms of our expectation of the Sportswear business in Q4 because we are managing the marketplace carefully. We have also taken into consideration not only what we have seen in the Middle East as it relates to traffic, but also our expectations of the disruption of that in this marketplace based upon what we can see today. And so that is really the other factor that we have taken into consideration in this fourth quarter guidance. But we continue to be encouraged by the momentum in North America. We have got a strong order book for summer. We are seeing positive signs in sell-through. We are not seeing a consumer reaction to what is going on in the Middle East at this point in time in North America. And so our teams are continuing to work hard to connect with consumers and to continue to rebuild back brand momentum across that geography and the rest of the geographies. Operator: Our next question will come from the line of Brooke Roach with Goldman Sachs. Please go ahead. Brooke Roach: Good afternoon, and thank you for taking our question. Elliott, Matt, was hoping to get your latest thoughts on the opportunity to stabilize the Sportswear business. How much additional reset activity is needed in the Classics franchise by geography? Are you seeing any green shoots in the North America Sportswear portfolio that gives you confidence that the strength in performance can translate to better momentum in Sportswear over time? Thank you. Elliott J. Hill: Yeah. Thanks, Brooke. Here is how I would think about it, and I said it in the prepared remarks, but we are definitely moving from defense to offense in both NIKE Sportswear and Jordan Streetwear. We have to think about both of those, especially as you think about North America. Let me first start with where we prioritized, and we did prioritize our performance business. And we felt like we had to get performance products right because sport is what drives our authenticity. It is our important difference and distinction. It drives our best products and storytelling. And, ultimately, sport is what creates a halo over the Sportswear and Streetwear businesses. And so we really got after the sport business through the and Running, a complete offense, making sure that we had innovative product driven by athlete insights. And now, as you are hearing from Matt and me, we are paying it off across the integrated marketplace. So it is working on the sport side. In terms of how we are doing on the Sportswear and Streetwear side, here is what I would say. And I did use the specific, where we intentionally pulled back, which created about a five-point headwind this quarter, of removing unhealthy inventory from those Classics. And what I would say is that the Air Force 1 and the AJ 1, they stabilized this quarter. And so we are seeing month-to-month improvement in full-price realization in those two franchises. And I also want to make sure that you hear me say that we see that as a positive because we believe these icons will always be staples for the consumer. We are still stabilizing the Dunks. We have a little bit of work to do there. But at the same time, the green shoots, as you call them, we are starting to see the team create some buzz around our business this quarter. We had some really good and tremendous launches: AJ 11 Gamma, the AJ 5 Wolf Grey, the NIKE Air Max 95, and all of them had a high full-price realization and really strong sell-through. So the Sportswear team is moving to playing offense, and what you will see from us is that team taking insights from the consumers that they serve and focusing on creation around comfort, innovation, and, yes, we will continue to leverage our unmatched vault. And so I am really pleased with the progress that the Sportswear and the Streetwear teams are making. But we still have work to do. And I call that out that we still have work to do, but I am confident in the actions that we are taking and pleased with the way the consumer is responding. Operator: Our next question will come from the line of Brian William Nagel with Oppenheimer & Co. Please go ahead. Brian William Nagel: Hey, guys. Thanks for taking my questions. So, Elliott, the question I wanted to ask, I mean, you have mentioned several times in your comments that you are heading in the right direction, but the process is taking longer than you initially expected. So the question is, as you look at the reasons for that, is it more internal, or is it more external? The environment in the different geographies or whatever has proven more challenging for the turnaround efforts here. Elliott J. Hill: Brian, I think the easy answer for me to say is a little bit of both. Here is what I would say. The starting point for each geo or each country was at a different place. And, by the way, each marketplace has a different structure as well. And so we had to make certain that we truly understood where each country and each marketplace was in terms of their performance across the entire integrated marketplace—again, NIKE Direct all the way through the different channels. And so I think the easiest way to think about it is, the comeback is substantial, and, at our size and scale, building for the future takes time. And it has taken longer than I would like. But what I would tell you is we got our teams reorganized from a product perspective as well in September, and Spring 2027 will be the first time we see the fruits of those teams working together. But in the end, I am pleased with where we are headed. And I think everybody, when I came into this role, said, “Hey, it is going to take two years.” And that is what we are tracking right now. So a little bit of both, Brian. We do have some external factors that we are having to deal with while we are in a major comeback. But that is no excuse. We are controlling what we can control. We are getting our teams lined up internally around product and the consumer and storytelling. And then we are getting our country teams lined up around driving a more integrated and elevated marketplace. And, ultimately, that is what is going to pay dividends for us and build the foundation for future growth. Operator: Our final question will come from the line of Matthew Robert Boss with JPMorgan. Please go ahead. Matthew Robert Boss: Great. Thanks. So, Elliott, if we take a step back, just update us on health of the global Sportswear backdrop, or where does your outlook for the industry stand today relative to when you took the helm? And then, Matt, on low- to mid-single-digit constant currency revenue declines for the back half of the year, is there a way to parse out self-inflicted headwinds or maybe where you see underlying demand exiting this fiscal year, and what have you embedded for overall sell-through rates through the balance of the calendar year just relative to the pressure that you cited that you have experienced to date? Elliott J. Hill: Matthew, let me take—so I think the easiest answer on Sportswear is that it will remain a very large part of the overall industry, and it will be critical to our success moving forward. So we are taking a streets-up approach to this and making certain that we help this big, giant business feel more local. And, again, it takes time to seed, ignite, and scale product over time, but returning to a healthy Sportswear business is essential and vital to our comeback because it will continue to be a critically important part of the overall market and overall part of our growth. So, with that said, I am incredibly positive on the athletic industry overall, not just in Sportswear, and we see it as a tremendous opportunity for us to continue to drive growth in an expanding market. Matthew Friend: And then, Matt, to your question on sell-through assumptions—maybe let me hit revenue first. For the first half of next year, I think it is safe to look to the range we provided for Q4 as a guide for what we are expecting for revenue for those last two quarters. And I think it is really highlighted by the trends that we have talked about. It is North America continuing to sustain momentum. We expect to see more balanced growth across channels. Given where inventory is in the marketplace, we expect to continue to see improvement in underlying profitability in that geography, and the top line will be tempered a little bit, like we have been talking about, because we are anniversarying quite a bit of off-price liquidation in the prior year. But it is a healthier business. It is a more profitable business. And it is a sustainably growing business across all channels of the marketplace. As you go outside the U.S., I think that we have been clear that we believe that we can complete the Win Now actions in EMEA and APLA by the end of this calendar year. That is how you should read what we are communicating. I think that will continue to be us going deeper on cleaning up the marketplace, especially digital. And quarter by quarter, we are planning for improvements in sell-through. As it relates to Greater China, we are managing sell-in. And by managing sell-in, we expect to continue the trend, like we saw this quarter, of sequential improvement in sell-through rates. And so we are managing supply in order to be able to continue to shift the mix of inventory in that marketplace to be more full price and more healthy. And that is why I gave the commentary around, while the actions we are taking will create a headwind to revenue in Greater China, we do expect to see profitability bottom faster because it is going to be a healthier, more profitable business as we set that foundation for much more balanced growth as we go forward in China. Operator: And that will conclude the question and answer session and our call today. Thank you all for joining. You may now disconnect.
Operator: Good morning, and welcome to the Genel Energy plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Paul Weir, CEO. Good morning, sir. Paul Weir: Good morning. Good morning, everybody. My name is Paul Weir, as you've just heard, I'm the CEO of Genel Energy, and I'm joined as usual by our CFO, Luke Clements. Welcome to our 2025 results presentation. We published our annual report and our full year results last week. And in my statements, then we broadly reiterated the key messages and guidance provided in our January trading statement. Obviously, the big change since January is the security situation in the Middle East, which has resulted in our production effort being temporarily suspended on a precautionary basis since hostilities began almost 4 weeks ago. Understandably, the operator's priority since then has been the safety of its personnel. Steps have been taken, however, to maintain a state of readiness for a prompt restart, but the security situation in the region remains very dynamic and very uncertain. The focus of this presentation then is not to provide you with the Middle East security update, which wouldn't likely add to the understanding you've already had from mainstream media. Instead, we will take you through the key elements of the performance of the company in the last year, the current position of the business and the catalysts and priorities for '26. Luke and I will work through these slides. I think there's 10 or 11 basically. We'll work through those fairly briskly, and then we will be very happy to take any questions that you submit during the course of the presentation. We start with an overview of the business, and this slide pulls together some key metrics to outline the building blocks we now have in place. We ended the year with a daily average working interest production rate of around 17,500 barrels per day. Net 2P reserves of 64 million barrels and a net cash position of $134 million. EBITDAX was $43 million. Our barrels are low cost with a low emissions rate, well -- industry average target rate for 2025, which was 17 kilos per barrel and with world-class operating costs at around $4 a barrel. Even in a year that included significant production disruption at Tawke and continued domestic market pricing, the business has remained resilient, cash generative and well funded and with the potential for very significant value uplift. The key building blocks for that significant value uplift are listed at the foot of this slide. The Tawke PSC, our world-class production asset generating material free cash flow even at domestic sales prices, a significant cash holding of more than $220 million at year-end and about the same right now, ready for deployment and a portfolio with significant organic upside potential from exports resuming, Tawke drilling resuming, Oman appraisal and Somaliland drilling, all of which supports our ultimate objective of getting back to a regular dividend in time. Once we've established some geographical diversity and the further resilience that follows that diversification and repeatable cash. On to the next slide, please. This slide sets out our strategy and strategic objectives in the way that we think about them every day. The 3 familiar boxes on this slide represent our objectives in simple terms, and I've spoken about many times before, so I won't dwell on them too much. Firstly, maintaining a strong balance sheet; secondly, maximizing cash generation from the assets we have, which means investment in Tawke and resuming exports from Kurdistan. And finally, adding some new sources of cash flow in a disciplined and value-accretive manner. That order matters, but we need to do a good job in all 3 of those areas if our eventual aim to return value directly to shareholders in a regular way. Let's move into the detail on the platform now. The world-class characteristics of Tawke are well known, but 2025 again demonstrated the resilience of the combination of the assets and its operator, DNO. If you look at the production graph on the right-hand side of the slide, you can see quite clearly the effect of the drone attacks in Q3 of last year. And thereafter, you can see just how quickly production was restored to a production rate at the [indiscernible] of the year of around 80,000 barrels a day. It's also worth noting that production in the months not impacted by the drone event was actually higher than the 2024 average despite no new wells contributing to that production rate. Drilling restarted then in Q4 of '25. First Tawke well was spudded in December and immediately started delivering results. A second good production well followed in the same month, but the 2026 drilling campaign for which 2 more rigs have been mobilized to site has now been suspended given the security situation. So today, we're in a position where both production operations and the drilling campaign are temporarily suspended, and we remain on standby until such times as the operator determines that it's safe to reestablish a full presence at site and resume activity. We remain close to and very supportive of the operator on that. All that aside, when we talk about Tawke as a world-class asset, we mean 254 million barrels of gross 2P reserves, very low operating costs, low emissions, long reserve life and clear upside from drilling. Right, I'm going to pass you on to Luke now for the next couple of slides. Luke Clements: Thank you, Paul. Good morning. This slide provides the buildup of what we call production business netback. Production business netback is revenue less production asset spend. That's both OpEx and CapEx, less G&A. It tells us what funding our business is generating and making available for capital allocation outside of the Tawke PSC. And you can see that it has been double-digit millions for 2 years in a row now, having been negative in 2023 despite similar levels of revenue. So you can see that we've been working hard on our spend. So what was the income side of that double-digit production business netback made up of last year? Firstly, while Brent averaged $69 a barrel in 2025, our realized price sold was $32 a barrel with all production sold domestically. If we were exporting, we'd expect that realized price to be close to Brent. Secondly, working interest production averaged 17,500 barrels a day, lower year-on-year only because of the drone-related interruption in Q3 that Paul just mentioned. And finally, EBITDAX of $43 million. You can see our underlying EBITDAX is back to more normal levels for domestic sales at around $35 million for the past 3 years now. This underlying number excludes movement on arbitration cost accruals, which negatively impacted '24 and positively impacted '25. So the key point here is that the production business is now delivering consistent double-digit netback even at domestic sales pricing, while still funding all production activity and investment on the Tawke license and so building our balance sheet cash position and available funding. That is the product of Tawke resilience and the discipline we've applied to the business since 2022 in simplifying the portfolio, stopping non-value accretive spend, exiting licenses and reducing cash G&A. Next slide, please. This slide illustrates our balance sheet strength. We finished the year with $224 million of cash, the net cash of $134 million and gross debt of $92 million. Our cash is about the same today as it was at the end of the year, so it's around $225 million. In April last year, we issued a new 5-year bond maturing in 2030, replacing the bond that had been due to mature in October 2025. That issuance was oversubscribed, and we continue to see good support and appetite for our bonds. That issuance has reduced funding risk around delivery on our strategic objectives. This remains a very underleveraged balance sheet with significant headroom to fund investment. That matters because the cash and capacity for further debt provide us with significant optionality. We can fund the appropriate Tawke program, progress our organic growth assets and pursue value-accretive acquisitions without being forced into decisions by capital structure pressure. Next slide, please. This slide shows our primary capital allocation options when we consider the best way to deliver shareholder value. Our first consideration is to maintain the strength of our balance sheet. Then the best place to invest our capital, providing the instant significant returns is the Tawke PSC. Then we think about how best to diversify our cash generation. All 3 building blocks have to be properly managed to establish a sustainable dividend. That means not every potential project will automatically be funded and not every acquisition opportunity will be pursued. Every value creation opportunity has to compete with others within our strategic framework. The Board reviews capital allocation on an ongoing basis, and we take care to remain disciplined. I'll hand back to Paul now to talk about our acquisition strategy. Paul Weir: Thank you, Luke. So look, we want to add resilient cash-generative production or near production assets that reduce our reliance on one asset in one geography. We want something that complements what we already have and supports long-term shareholder value. During 2025, we were very active. We originated, developed and actually bid on a number of opportunities. We were involved in bilateral discussions and in broader processes, too. We've looked at opportunities within our current region and further afield. And to be entirely frank, although it's early days still, 2026 is already shaping up to be as active as 2025 was. Having said all of that, there isn't an abundance of suitable opportunities, and there's a great deal of competition for the good ones that are available. So we continue to diligently scan the deal horizon. We're trying to avoid being distracted by the current unsettling events. Patience and discipline are key. Finally, on this, and again, as we've made clear in previous presentations, we will resist overpaying to get short-term positive market reaction only to find over time that the assets that we buy are unable to deliver the value that we need. We remain very confident that we will secure the right opportunity in time. On to Oman then. On Block 54, the initial activity set did exactly what it needed to do. The reentry and testing of the legacy Batha West-1 discovery well was completed safely ahead of time and under budget. That was a low cost and very useful first step in understanding the block better. Our block is adjacent to the prolific Mukhaizna field, and we are targeting reservoirs that are proven in that neighboring field on another adjacent block, Block 4 and on legacy well logs from Block 54 itself. The immediate focus now is not to rush to a drilling location decision. Instead, we will use the data from Batha West properly to reprocess existing seismic and to acquire new 3D seismic in the most efficient and cost-effective way that we can, so that the joint venture can identify the best locations for the 2 commitment wells that we will now drill on the block. That's the right technical sequence, and it's also the right capital allocation sequence. And based on current planning, we expect those commitment wells to be drilled early in 2027. So Block 54 is exactly the kind of exactly the kind of organic opportunity that we like, modest initial capital outlay, a clear work program, data-led decision-making and meaningful upside if the subsurface case continues to strengthen. And on Somaliland on the next slide. In Somaliland, the opportunity remains for a material discovered resource addition from our existing portfolio, and we've seen steady progress towards drilling the highly prospective Toosan-1 well. Toosan-1 targets best estimate prospective resources of about 650 million barrels across multiple stacked reservoir objectives. As the first mover, the commercial terms are also very attractive, meaning that even a modest discovery would likely be commercial. Of course, wherever we find logistically will benefit from proximity to the Berbera Deep Water Port on the Gulf of Aden. In terms of drilling preparedness, the majority of the civil engineering work is complete and most long lead items are already held in inventory, but we will remain quite measured in how we talk about this. There's still work to do. That work is ongoing, and there is still a need for operational, commercial and geopolitical elements to all come together. The key takeaway for today is one of continued progress towards drilling, while we continue to invest in the well-being of our host communities there to further strengthen our social license to operate. On the next slide, we'll -- we can see -- we can sort of give you a flavor of the work that we carried out last year and through into the first quarter of '26. We've been proactive in the areas of mother child health care, educational facilities and conservation projects. And we've been reactive. Very importantly, we've been reactive in response to the very severe drought conditions that the region is now suffering. Genel has recently distributed around 9 million liters of fresh clean water in the area of our SL10B13 license. Okay. So I think we can wrap up now. This closing slide returns to our 3 strategic pillars. Firstly, maintaining a strong platform. That means protecting the balance sheet, keeping the business efficient and being careful about how we spend our money. Secondly, maximizing cash generation. That means cost consciousness, executing the Tawke drilling program well, pursuing the net amounts that are owed to us and positioning ourselves to participate in exports when the conditions are in place -- when the right conditions are in place. And finally, diversifying production and free cash flow. That means finalizing and executing the right plan for Block 54 and continuing to progress Toosan-1 and Somaliland. Most importantly, it means continuing the disciplined pursuit of value-accretive acquisitions. Those are the building blocks. They're fairly straightforward. They are mutually reinforcing and they remain the right framework for Genel's value delivery. If we execute well, we continue the journey towards a business with resilient cash flows that can support a regular dividend for our shareholders. That's our clear objective, and we are determined to get there. So thank you. That was a relatively brief run through the slides, but I want to thank you for your time this morning. Luke and I will now be happy to take any questions that you might have. Operator: Paul, Luke, thank you both very much for your presentation. [Operator Instructions] Guys, as you can see we received a number of questions throughout today's presentation. Could I please hand back to Luke to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Luke Clements: Thank you. So there's a few questions on security in Kurdistan, Paul, and how quickly we can restart production. I think as you said at the start, we're not really going to comment on security in the Middle East and Kurdistan because it kind of changes all the time. There is a question about once you do restart production, how quickly can you get back to pre-conflict production levels? I think it is worth you answering, Paul. Paul Weir: Well, I think we can get back to preproduction -- pre-conflict production levels very quickly indeed. I mean it's worth pointing out, and there is a little bit of an overlay here into the security question. We've shut down as a precautionary measure. We haven't been targeted, and we haven't suffered any damage during the course of the current conflict, although obviously, there's been quite a lot of ordinance heading into Kurdistan. It's not been headed at us. The point being that when we do sense that the time is right to restart all the equipment there and functional. The operator has been working cleverly to make sure that we maintain a state of readiness. And as soon as we can get boots back on the ground, we can get production away quite quickly. So I'm confident that we can resume production levels pretty quickly within a week or 2 of giving ourselves a green line. Luke Clements: Okay. So staying Kurdistan on exports. We understand that the Tripartite deal has been extended to the end of June. Has Genel approached MNR to join the deal? Paul Weir: The answer to that is no, we have not approached MNR to join the deal. I think we've made our position on the current export arrangements quite clear, but I'll repeat them just now. A number of our peers elected to participate in that arrangement. We chose not to do so. We wanted to make sure that all of the conditions within the deal were on fully before we felt able to commit to that. Primarily amongst those conditions, of course, is the top-up payments that would actually render the participants hold with respect to the PSC. So we would want to see that before we elected to try and join the current arrangements. In the meantime, we would continue to sell our product locally. Luke Clements: And there's a kind of related question, which you've kind of answered, how are other operators being paid through the pipeline. I mean, for me, Paul, that's really for others to comment on. It looks like the first part of that is working okay. But as you alluded to, we -- the top-up payment hasn't been expected yet and hasn't been paid yet, I think, is the right way to think about it. Paul Weir: Agreed. Luke Clements: Are you still a member of APIKUR? Paul Weir: Yes, we are still a member of APIKUR. Obviously, when some of the APIKUR members elected to participate in the export or the arrangements that were in place up until the facility stopped. When some of the APIKUR members elected to participate in that arrangement and others chose not to, APIKUR essentially divided into 2 counts, but APIKUR remains the trade association. It remains the forum where all of the IOCs within Kurdistan can talk together. And we have a directorship there, and we remain a part of APIKUR. Luke Clements: Okay. Moving outside of -- sorry, one more on Kurdistan. Any update on court case costs? Paul Weir: No, there isn't. And next month, our appeal against the award of the other side's costs goes to court, and we're waiting to see the outcome of that appeal before we engage with the authorities on that matter. Luke Clements: Okay. So now as on Kurdistan. How quickly can new assets? And I don't know if that means the organic portfolio or newly acquired assets, but how quickly can new assets meaningfully reduce reliance on Kurdistan? Paul Weir: Well, those new assets, if we're able to secure the kind of asset that we're looking for, those new assets can immediately reduce our reliance in Kurdistan because it's a production asset, then we benefit from a new income stream immediately. So certainly, first prize for us is securing an arrangement that gives us an alternative cash flow as soon as the transaction is completed. As far as the other -- as far as near production assets are concerned, if we were to go down that route, then it would be entirely dependent on the nature of the deal we were considering. I couldn't give a time line on that. Luke Clements: Yes. I'd just add, we've always said we want to do a bigger deal rather than a smaller deal. And you can see the cash pile we have on the balance sheet. And you can assume that an asset we acquire would have debt capacity on it as well. So you can see if you're spending that kind of money, you should be able to achieve some meaningful diversification of your cash generation. I think you probably already answered it, but can you provide an update on Toosan-1 in Somaliland? Any specific milestones before spud? Any specific time line that we want to set out? Paul Weir: No. I think I appreciate there'll be a great deal of curiosity around our progress in Toosan-1 because we talk about it and from an outside-in point of view, it may at times be difficult to see progress, but work does continue, and we are quite active on that front. Engineering work continues and procurement work continues. We've been looking at the market to -- we have most of the long lead items in place, but we've been putting together a project execution plan. We've been putting together a project plan. We've been trying to determine who are the best people to come in and help us manage that drilling campaign. And all of that continues as we speak, and we have people in-house dedicated to that task. And as with all projects of that nature, we have a stage gate process in place. So we will convene with the executive every time we reach a stage gate, and we will convene with the Board every time we reach a stage gate. And we will take a conscious decision to embark on the next stage of the process and be prepared to spend the money that's associated with that particular stage. We can't commit to a particular time line at the moment. As I said in the presentation, a number of commercial, operational and geopolitical pieces of the jigsaw need to fall into place together before we can actually define with certainty when things are going to happen. But work does continue, and we are committed to the cost. Luke Clements: Okay. Back to Oman. What is your estimate of drilling costs concerning the 2 wells in Oman? Paul Weir: Well, the wells are relatively shallow wells, and we're in an area that's well serviced by the oil industry. So services are readily available. We're competitive and they're relatively low cost. I wouldn't want to put a figure right at this moment for the well cost because, of course, that's determined to some extent by precisely where we want to drill, and we haven't determined precisely where we want to drill yet. But what I can repeat is what the cost of this entire project is going to be, and that's around $15 million over a 3-year period to Genel. That obviously started last year. So all the work that's taken place so far has been extremely well planned and very clearly executed and it's below budget. But we're expecting to spend a total of around $15 million over a 3-year period starting last year. Luke Clements: Okay. It looks like we are through the questions. Operator: Thank you both for answering those questions you have from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company. Paul, could I please just ask you for a few closing comments? Paul Weir: Yes. I mean I'll close, first of all, by thanking everybody for taking -- continuing to take an interest in Genel and for taking the time to listen to us talk about our business today. I just want to close basically by reiterating the 3 main points that we wanted to land during the course of this presentation and in fact, in all our recent presentations. The first is that we have a very resilient business, and our strategic priority is to maintain that degree of resilience, protect the balance sheet. The second is to emphasize the extent to which we have potential within the organic portfolio. Oman and Somaliland, both represent very exciting potential value builders for the business, and we continue to push forward with those. But of course, the biggest story and the biggest strategic thrust at the moment is making use of our cash pile. We've been sitting on that quite patient and are waiting for the right deal. But we continue to be very, very active in the M&A space, and we continue to be extremely confident that in time, we are going to find the right deal that's going to allow us to deploy that cash. So thanks, everyone, for your time. Thanks very much for the questions, and we look forward to talking to you with more good news. Operator: Paul, Luke, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of Genel Energy plc, we would like to thank you for attending today's presentation, and good morning to you all.
Operator: Good morning, and welcome to JBS Fourth Quarter and the Year of 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Any statements eventually made during this conference call in connection with the company's business outlook, projections, operating and financial targets and potential growth should be understood as merely forecast based on the company's management expectations in relation to the future of JBS. Such expectations are highly dependent on the industry and market conditions, and therefore, are subject to change. Present with us today, Gilberto Tomazoni, Global CEO of JBS; Guilherme Cavalcanti, Global CFO of JBS; Wesley Batista Filho, CEO of JBS USA; and Christiane Assis, Investor Relations Director. Now I'll turn the conference over to Gilberto Tomazoni,, Global CEO of JBS. Mr. Tomazoni, you may begin your presentation. Gilberto Tomazoni: Good morning, everyone. Thank you for joining us today. We closed 2025 with a consistent performance and our continued progress in building a stronger, more efficient company. In the fourth quarter, we recorded a revenue of $23 billion with an EBITDA margin of 17.4%. For the full year, revenue reached $8 billion, a company record with a consolidated EBITDA margin of 7.9%. This scale and the diversity of our multi-protein and multi-geography platform remain our greatest strength, allowing JBS to navigate industry cycles or any disruption while capturing structural growth in protein demand. In both the fourth quarter and the full year, JBS delivered record sales with positive consolidated results, reflecting the resiliency of our global platform. Net income totaled $415 million in the quarter and the $2 billion for the year, representing year-over-year growth of 15%, earnings per share of $1.89 per year. Free cash flow was $990 million in the quarter and $400 million for the year. Return on equity reached 25%, and the return on investment capital was 70%. Our leverage ratio at the end of the fourth quarter was 2.39x in line with our long-term target. We also maintained a very strong debt profile with an average debt maturity of approximately 15 years and average cost of the debt of around 5.7%. No significant maturity in the short term. These strong results reflect our consistent performance in a year marked by a challenging environment in some global protein markets. In the United States, the cattle cycle remains under pressure with a limited supply and high cost. This is expected to continue in the coming quarters. Despite this environment in U.S. beef sector, our global results remained positive reflecting the resilience of our diversifying platforms. Australia was one of the highlights of the year. With a strong EBITDA growth and margin expansion as well as the top line growth of 30% year-over-year in the fourth quarter. Our Australian business benefit from the currently imbalance between global supply and demand of beef. Combining with a strong execution and support solid profitability and reinforce the role of region in balancing our global results. In Brazil, the beef business operates with a historical margin range supported by strong export and steady domestic demand. The fourth quarter was particularly strong with the top line sales growing 26% year-over-year. At the same time, livestock productivity continued to improve. Country recorded highest beef processing volume in its history at around 42 million heads. This reflect a total gain in production and reinforce and Brazil growing role in a global supply. In this context, Friboi delivered solid results. with growth in both export and domestic sales volume increase in key international markets, including Mexico, Europe and United States. While the business also strengthened its presence in Brazil, programs such as Friboi+ continues to deepen client relationship and support growth in the domestic market. At Seara, we continue to advance our strategy and strengthening brands and expanding high value-added products. In recent years, Seara has expanded its portfolio entering new categories and strengthen in connection with the consumers. The business is now one of its strong moment in brand perception supported by innovation, execution, a more differentiated product mix. In the United States, our chicken business continued to benefit from the strong demand in both retail and food service. Pilgrim's delivered volume growth above the industry average in segments such as case ready and the small bird. The big birds segment also improved performance through better yields, mix and cost efficiency. Brand diversification continues to progress and Just Bare surpassed $1 billion in retail sales reflecting the strength of our brand strategy and the significant opportunity we see to capture further growth across our modern high-value prepared foods portfolio. In U.S. Pork business, performance remained stable, and the business closed the year with solid margins, supported by disciplined operation and balance supply and demand. Also, in 2025, we completed the dual-listed process, a milestone at the company's history and became a nice listed company and strengthened our capital market position. Since then, we have seen a clear improvement in how the market values the company. Our trading multiply and expanded reflect greater visibility and investor confidence although we still trade at a discount to our global peers. Liquidity also has increased significantly with average trading volume up approximately 3x compared to the prior listing levels. At the same time, our shareholder base has become more global and diversified. U.S.-based investors now represent nearly 70% of the company free float. Overall, this change reinforced our position in global capital market and support the next phase of growth. Global protein consumption continues to grow, supported by demographic health awareness and demand for balanced diets. JBS is well positioned to meet this demand across markets and channels. Our structure remains clear. We will continue to strengthen our brand, expand our value-added portfolio and develop solutions that make protein more accessible and more convenient everyday life. Thank you again for joining us today. And now I will turn the call over to Guilherme, who will walk through our financial results in more detail. Guilherme Cavalcanti: Thank you, Tomazoni. To the operational and financial highlights of the fourth quarter and fiscal year of 2025. Net sales reached a record of $23 billion in the quarter and $86 billion in 2025. Adjusted EBITDA in IFRS totaled $1.7 billion, which represents a margin of 7.4% in the quarter and $6.8 billion in 2025 with a margin of 7.9%. Adjusted EBITDA in U.S. GAAP totaled $1.5 billion which represents a margin of 6.5% in the quarter and $5.8 billion in 2025 with a margin of 6.7%. Adjusted operating income was $1.1 billion with a margin of 4.7% in IFRS and 4.8% in U.S. GAAP in the fourth quarter. In 2025, adjusted operating income was $4.5 billion in IFRS with a margin of 5.2% and $4.4 billion in U.S. GAAP with a margin of 5.1%. Net income was $415 million in the quarter and an earnings per share of $0.39. For the year, net income was $2 billion and earnings per share of $1.89. Excluding the nonrecurring items, adjusted net income would be $500 million and earnings per share of $0.47 in the quarter and for 2025, $2.2 billion with an earnings per share of $2.10. Finally, return on equity was 25% and return on invested capital was 17%. Free cash flow in fourth quarter 2025 reached $990 million compared to $906 million in the fourth quarter 2024. The main positive drivers were related to the deferred livestock, particularly in U.S. and inventories, reflecting strong revenue growth during the period. Despite an $850 million in working capital consumption in 2025 the cash conversion cycle remained resilient and in line with prior year's levels. For the full year, free cash flow totaled $400 million. When we visited free cash flow breakeven, IFRS EBITDA exercise for 2025, the initial estimate EBITDA to a breakeven level was around $6 billion. However, considering the actual results, the EBITDA breakeven would be approximately $300 million lower. The main difference came from working capital, as mentioned earlier, mainly reflecting the deferred livestock effect and a decrease in inventories. On the other hand, CapEx came in about $100 million above estimates as we executed $1.1 billion in expansion CapEx during the period. We also saw a higher number of biological assets, largely driven by the increasing livestock volumes and prices, while the remaining items came in broadly in line with our estimates. Finally, the higher cash tax paid in 2025 were mainly related to the tax payments associated with the results of 2024. For 2026 and for the purpose of the EBITDA cash flow breakeven exercise, we can assume capital expenditures of $2.4 billion of which $1.3 billion is for expansion and $1.1 billion is for maintenance, interest expenses of $1.15 billion and leasing expenses of $500 million in a consolidated effective tax rate of 25%. Just to highlight, it is still too early to estimate the variation in working capital and biological assets as there are many factors beyond our control. such as grain and lifestyle prices. However, if you consider the same amount of working capital consumption in biological assets of 2025, EBITDA cash flow breakeven would be $5.7 billion, in line with 2025 numbers mentioned above. On Page 24, we present our historical free cash flow breakdown to help analyst forecast. Our leverage ended the year at 2.39x, in line with our long-term target of keeping net debt to EBITDA between 2 and 3x. In 2025, we also strengthened our balance sheet by extending our debt maturity profile, reaching an average debt term of approximately 15 years and an average cost of 5.7%. We have no significant debt maturities until 2031. The coupons of our debt are below treasury until and including 2032 maturities with 32% of our gross debt maturing beyond 2052 and approximately 90% of the total debt is at fixed rates. It's worth mentioning that despite the 8% increase in net debt in the last 3 years, net financial expenses remained at the $1.1 billion per year. Our $3.5 billion in revolving credit lines and $4.8 billion in available cash provides us the flexibility to continue executing our expansion CapEx, value creation products and shareholder returns while maintaining a healthy and robust balance sheet. For this reason and given our strong cash position and leverage, we announced last night, the payment of $1 per share in dividends to be paid in June 17. With that in mind, I would like to turn the operator for a question-and-answer session. Operator: [Operator Instructions] We have our first question from Lucas Ferreira with JPMorgan. Mr. Ferreira, you may go ahead. Lucas Ferreira: I have 2. The first one, if you can give us an update on the business environment for PPC, especially in the U.S., but there were some renovation works at the Russellville plant wondering if those are completed. If operations remain fine, if this could be an issue at all for the quarter as well as any update you see in the market regarding crisis. It seems that we are in an environment of a bit more supply than the first quarter of last year. So if you see how robust is the market and how balanced the market today? And the second question is on the U.S. beef operations. We saw a pretty steep recovery in beef spreads over the last few weeks. So to what you attribute this, obviously, demand remains strong, but there have been some capacity rationalizations in the industry. Any updates on the Greeley situation will also be welcome with regards of what -- how that impacts your business and how you see the market for U.S. beef for now? Gilberto Tomazoni: Lucas, thank you for your question. And I will start here to talk about update in terms of Pilgrim's and after that, Wesley will give us the perspective of beef in U.S. As you mentioned before, we completed the transformation of 3 plants of Pilgrim's already completed it. One, we transformed from big bird to case ready because we have a strong demand in the retails, and this strategy will support the retail growth of the demand of chicken. In the other 2 plants, in reality is not a transformation. It's adequate to produce the raw material for our prepared business. Before we sell -- we sell the breast to the market because we are not able to deliver the appropriate cuts that our prepared food needs. Now we invest in machines and we are not need to sell and buy and rebuy the raw material. Now we deliver direct to our prepared business. This, of course, we catch the margin of the third party I think and we are keep best quality and be able to react quickly in case of the increasing demand. And I understood that as a second point that you mentioned about supply/demand. I can say to you, the demand for chicken meat in U.S. is not just in U.S. It's a global demand is very high across all the chains. And if you take in consideration in U.S. the chicken placement in the beginning of the year, grew around 3% and the price of chicken breast increased in the market. But this shows that a balance in supply and demand because we increased 3%, the placement of chicken and at the price of the breast increased. And if you -- USDA forecast for this year is that it will be 2% growth in chicken supply. If we grow 3% in the price market increase, we can anticipate if the forecast 2% will be a very good year for Pilgrim's in U.S. I think this is 2 components. The verticalization of our raw material production, we get more margins in prepared. In the growth of our prepared business in Pilgrim's Just Bare have a strong demand and we are investing in new factories. We see that this year will be a good year for Pilgrims. Wesley Mendonça Filho: Lucas, fourth quarter was a pretty good quarter given the market conditions on the beef side. It's common knowledge that given the market data that first -- at the beginning here of the first quarter has been really tough, really, really difficult, very challenging. Probably the most challenge we've seen in this industry in a very long time. I don't know if there is any other time that we had such, actually a negative spread for January and February ever. And it seems now that current data shows that March is showing that it's going to be a little bit -- it's going to become better, sharply better than where we were from January and February. But let's see what comes out of that. When we are -- one of the things that has happened in this scenario that we have very low cattle availability and very low processing volumes is that the market has become more volatile than we're used to in this market. You see big fluctuations in cutout, big fluctuations in cattle, more so than what we're used to. So that's just an effect of having such a small volume. If you -- if the volume is a little bit higher, it has a big impact and it's become a little bit more volatile. When it comes to the striking really, it's very difficult to forecast how that a strike would go on. We have a very good deal in front of that local. We actually just did a national deal with 14 other unions in red meat -- 14 other locals from the same union in red meat, and it's a historic union company deal. We have a variable pension plan. That's the first time in forever that the industry has brought back pension, something like that for people when they retire for our team members. So we have a very good deal, actually, even -- I think I would say it's probably one of the most innovative deals that we've had in a long time in this industry. So let's see. We think that we hope this gets resolved as soon as possible. Operator: Ladies and gentlemen, we have Mr. Gustavo Troyano from Itau would like to ask a question. Gustavo Troyano: My first question is on Seara and related to chicken supply here in Brazil. We acknowledge that discussions on the supply side should always be on a relative basis to demand, which seems quite strong at this point. But just wanted to get your updated thoughts on the balance between chicken supply in Brazil, what to expect going forward as we move into the second quarter of 2026, if you guys are expecting the chicken supply increase to outpace demand in a way that we could see some profitability compression going forward. So that would be the first question. And the second one, still on U.S. beef and a follow-up on the first question actually is, would you say that the current balance between slaughtering capacity in the U.S. and demand and cattle availability will imply some capacity adjustments going forward from other players or even from you guys. So what could you say on further capacity adjustments going forward because cattle availability is restricted right now. So just wanted to get your updated thoughts on that as well. Gilberto Tomazoni: Thank you, Gustavo. Talking about chicken in Brazil and Seara and after that Wesley will complement the answer about beef in U.S. When you chicken in Brazil, the balance between supply and demand for chicken is still not very clear to us. In one hand, we have strong and growing international demand and new cases of poultry farming influenza in several countries with culture that produce as a competitor of Brazil. And this could boost demand even further. The other hand, we have 2% to 3% increase the chick placement up to February. This is as a reasonable limit for growth in Brazil. There is some news that chicken breeder stock has increased. In this scenario, it's difficult to predict the unfolding events if production of exceed market capacity. But in this case the industry, the sector, the industry has many of tools to manage this. For example, we can export more fertile eggs, we can reduce the average age of the breeding stock. We can reduce the weight of the birds among others, means that so far, the market is very balanced in the market, and we see a strong demand in the international market. If -- because if you look for the breeders can increase more the volume domestic market, each industry needs to take its own decisions. But they have a lot of ways to manage of this supply because chicken is not still in the farm. It still place it. It is in the genetic I can say -- I can talk to you about what -- in our side, how we are -- what we are doing. We are focused on strengthening our export leadership. We have -- and enriched our value-add mix in domestic market. I think it's the both strategy we have. We have well positioned in international market and well positioned domestic market, and we are at value and be more innovative in terms of the way that you present the product to the consumers. Wesley Mendonça Filho: Gustavo, on the U.S. beef, this question about capacity adjustments, it's very difficult for me to answer about, especially when it's something that's not related to our business directly, right? So it would be a competitor. It's very difficult for me to respond on that. . It's clear that there is more capacity in the U.S. than there is kind of available in the U.S., not too many years ago, 4 years ago, had processed 33 million head, and now we're going to be below 27 million. So we're around 27 million, sorry. So that itself shows that yes, there is excess capacity. Having said that, it's very difficult for me to respond about something that's regarding other companies. Operator: Our next question comes from Lucas Mussi with Morgan Stanley. Lucas Mussi: My first one is related to Brazil beef in Australia. If you could talk to us a bit about how you're thinking about the export environment in the context of Brazil and also Australia eventually reaching the limit of the export quota to China? How are you thinking about how volumes are going to behave, perhaps in the second half of this year? What are you thinking about your options here and potential impact to the business divisions and the second one, one for Guilherme. If you could share more details on derivative lines on your P&L that went a bit lower this quarter, that would be helpful. And also, I know that there's still -- we're still a bit early to talk about concrete working capital expectations for this year. But if you had to evaluate looking at where commodity future is today or grains for livestock. What would be your assessment on working capital potential as things stands today for the year, maybe a little bit below 2025, in line with 2025, if you have any on working capital. Gilberto Tomazoni: Thank you, Lucas, for your question. Let me to separate. I think in Australia and Brazil, that is a different scenario. Australia, we are not seeing any challenge in terms of the -- after the quota of Australia to China because Australia is a strong market demand and has a very strong presence in Japan and Korea and all of the Asian markets and U.S. as well and Europe, then Australia is easy to manage the volume for each one of these markets that we are not really worried about this situation. In Brazil, may be more complicated. But our I will talk related to that. But our Friboi team is very confident that they will be able to deliver in this year 2026, this resulting with the line that the last year. Why we are confident on that. Global demand for protein is high, especially for beef. China's quota, if you talk about -- we are expecting to end by the midyear. And in reality, we don't know how China will manage this volume restriction. I believe that some countries will likely not be able to complete their quotas. But this is -- we cannot speculate, but this is a fact. Regarding this situation, Friboi has developed a new international market, new sales chain and investing heavily in value-added and combined with customer service. An example of this strategy is the program of Friboi+ now I think last week at the supermarket conventional in Rio de Janeiro, Nielsen, you know Nielsen, gave a presentation comparing a store with a regular butcher shop to one with Friboi+ and the results showed that the start with the program has a higher revenue and 40% higher overall sales, not just the butcher area, the overall sales, that it's a strong program to support the growth of our customers. And at the same time, the retailers now face a challenge because they need to improve the quality of the sales in the stores because this shift for more protein, this program, what GLP1 and so on, that is booming the consumption of protein they need to enhance the portfolio in the retail. And in our program is, I think it fits perfect with this trend in the necessity of the supermarket. The other point, I believe in the second half of the year, when the supply of feed lot in Greece, this coinciding with the end of quota of China, which is large -- and we know that China is the largest pork selling channel, the price of cattle will likely be affected. I think this will be correlation because of that we are so confident that we are able to deliver this year and results in line with last year. Guilherme Cavalcanti: So on the derivatives line, what you saw there is any sort of derivatives that's not related to the operations. And the recent volatility in currencies and other commodity prices make this number higher despite we have a very limited VaR for those type of derivatives. Now on the working capital side, so far, what can I say, it's only about the -- what we've seen in the first quarter. So first quarter 2025 we have a slightly lower working capital consumption than in the first quarter of 2024 despite the $200 million higher impact of the deferred livestock. So again, it's too early to say for the whole year. But if considering just the first quarter, we had a little lower consumption of working capital. It doesn't mean a lower cash consumption, given that the operational side is slightly worse. Operator: Our next question comes from Thiago Duarte at BTG. Mr. Duarte? Thiago Duarte: Yes, two follow-up questions going back into U.S. beef and then Seara. Wesley mentioned the strong quarter considering the circumstances that you had. But I'm still wondering what do you believe justifies that performance? I mean, Q-over-Q margin rebound, it's not something typically happens considering the seasonality in Q4 and even looking at the industry cut out spread. So my question, you mentioned the volatility has been something that's even higher than usual and maybe that has something to do with a particularly good quarter in Q4, but if you could elaborate a little bit more on what you think justifies that in this quarter in particular. And a follow-up question on Seara. I think Tomazoni talked a lot about chicken demand and protein demand in general. So my sense is that what really drove this very good margin at the Seara division in the quarter was really related to chicken, fresh chicken in natural chicken exports as opposed to the domestic prepared food portfolio. So my question is really if that understanding is accurate in terms of, again, natural margin versus prepared food margins for Seara in the quarter? Wesley Mendonça Filho: So especially when the market has such a volatility in cattle prices and cut out values it's very possible, especially when you look at just the quarter, right, that you have a quarter that you position yourself really well and other ones that you position yourself a little bit worse. And between quarters, you could have those -- just from a positioning perspective, it could be either have a very good -- look really good or look a lot worse than you expect? And just given this such intense volatility that more than we were expecting, I saw some reports maybe question a little bit about if there was any hedging or derivatives there, there was nothing significant from that perspective. I think it's just when markets are more volatile, and you make position selling out -- selling product upfront and all of that, sometimes you get good position sometimes could get worse. I would -- I think the best way to look at performance is look at overall longer term than just one quarter, one quarter could kind of misleading positive or negative either way in this sort of business, especially with the sort of volatility that we've been having on cutout and cattle price. Yes, that's in that foundation. Gilberto Tomazoni: Thiago, let me make some assessment position about what you said, if the margin, if you understood well, you asked for the margin of prepared foods in domestic market and versus to export chicken -- commodity chicken to international market. If you take just in consideration, the margin, yes, the margin of international chicken was higher than the margin of prepared in domestic market. But say that, we improved the margin of the prepared food and domestic market. If you remind some quarters ago, I mentioned that we are advancing as a process to improve our price management in order to get the real value of the brand in domestic markets. And this is a continuous process. We are now focused on taking the advantage of we have the perception of the brand, we have Seara in the market. The penetration of the brand and the rebuy of the brand from the consumers. And we are strengthening our process in order to get this value. And because of that, we are continuously improving the margin in domestic market. But yes, you are right. If you compare this quarter, the margin of international market for chicken was higher than the margin of prepared in domestic market. Wesley Mendonça Filho: Thiago, just to complement something on beef that I meant to say and I forgot. For sure, this comparison quarter-by-quarter could create some -- a little bit of that when it comes to position, positioning of how you sell forward and how we buy and all of that. But having said that, we are very satisfied with the way we are operating. There are still opportunities for sure. There's things that we're working on. But when we compare our operations, just the things that -- how we are running our plants and how we are running our sales strategy, our procurement strategy, compared to a few years ago, we think we've made a lot of progress, and I think we're doing a lot better than we've been doing in the past. Operator: Next is Isabella Simonato from Bank of America. Isabella Simonato: First, on the working capital for the quarter, right? You mentioned the deferred payment of livestock as well as inventories. Can you just give a little bit more details on the inventory performance and versus where you were expecting, right, when you mentioned in Q3 for the remainder of the year. What changed? And what can -- how can that -- if there is any impact to be postponed or translated into 2026 performance? And second, on Seara, you were mentioning right, Tomazoni, about the margins in Brazil. Can you comment how you're seeing Brazilian consumers behaving in the beginning of the year if there is room to increase a little bit prices and if volumes have picked up, we noticed that retailers were running with lower inventories in the end of 2025, and there was any significant change in behavior in the beginning of the year? And finally, if you could give us a brief overview of how are your grain inventories and how you're seeing feed costs for the remaining of the year? Guilherme Cavalcanti: So on the working capital cycle, Isabella. So every fourth quarter is a quarter that we decrease inventories, and we'll review them in the first quarter. And the same happens to the livestock, which we postponed payments from 1 year to the other. Between 2024 and 2025 and '26 we postponed this year $600 million in livestock. Last year, we had postponed $400 million. So we had a $200 million better impact on the fourth quarter. That will be a $200 million worse impact in the first quarter that I mentioned in the previous question. And that is in the inventory side, the same thing. We are seeing the same level of inventory rebuild that we saw in the last years. Gilberto Tomazoni: Isabella, thank you for your question. When you look for -- we have two separate questions. One is, if I understood well, one is related to the behavior of the consumer and domestic market with Seara. We see that the market starts a little bit weak in the beginning of the year in January but they're back, now we are -- when we look for our sales, we are growing the sales compared to the last year but deep with different mix with a value-add mix growing much faster than the low -- the traditional and low value-added it's difficult to say what is value added or not value-added it's prepared. But say, look, the traditional, they are selling less than the innovation. We have a huge growth in the innovation line with high-protein products, air-fry products designed for air fryers, clean label product, this kind of innovation. They grow much faster than the other ones. But average, when we compare this year with the last year, we are growing, even some challenge and some different chains, but it's growing. But it start as just to be clear, we start very tough, very tough in the beginning and recover. Now we are -- our sale is higher than the last year for prepared. And when you talk about the cost, I think you will talk about grains because there is a lot of consideration. We have different views in terms of corn and soybean meal with these 2 key elements for our feed. In the corn market, we see an upward trend. We should expect higher costs in 2026. And due to -- if you look for reducing the global stock and solid demand, increased crude oil price that boost in ethanol margin as well the cost and availability of fertilizers. U.S. acreage at risk given the soybean ratio. And the second crop in Brazil, in face of some climate risk. That we are, I think, is we expect higher costs for corn. In the soybean mill, we see price stability and do the -- if you look for the crush margin, they are positive and as the crush margin positive, we result in as abundant supply. And in the other part, weak Chinese demand to the tight pork margin in the market. But I think it's for soybean meal, we need to monitor U.S. acreage issue in the biofuel policy. But anyway, our outlook remains bearish. Operator: Our next question comes from Henrique Brustolin with Bradesco. Henrique Brustolin: I have 2. The first on U.S. beef Wesley, if you could comment about the Mexico cattle imports, right? They have been shut for a while now. Maybe this could be a discussion the reopening could be a discussion amid the higher prices in the U.S. So it would be great to hear your thoughts in how relevant that could be in shaping the outlook for 2026 if we saw a reopening of the animal imports from Mexico to the U.S.? That will be the first one. And the second is a quick follow-up on Seara but Seara has been through a very big investment cycle over the past few years. It would be great just to hear how those investments have already ramped up and what would you expect for volume growth into 2026 as probably you complete the ramp of some of those plants? Wesley Mendonça Filho: Henrique, so on Mexico, it's difficult to tell when that's going to reopen. I mean it's very meaningful. It's 1.2 million to 1.5 million head per year. So it's more than the size of a double-shift plant, right. So it's a big bottom and it's very important, especially to the south of the U.S. I mean the USDA is doing -- I mean, it's doing a good job in doing all we can to keep the disease outside of the U.S. They are working on the sterile flies and all of that. And Mexico, obviously, is also trying to get this result as soon as possible. But for me to be able to tell you like I hope that this would get resolved within the year, but I have no way to forecast and to even have an indicator of if that's going to really happen anytime soon. But it's really important is probably the most important short-term change that could happen to this whole beef supply and demand equation. The most relevant in the short term for sure, it's this whole Mexico thing. It's very important, especially for the south of the U.S. But again, it's very difficult for me to tell you a forecast. I hope it opens this year or as soon as possible, but very difficult forecast. Gilberto Tomazoni: Henrique, about the investment of Seara, all of them will be completed this year. And when completed the additional capacity will be around 10%, 13%. I will say 10%, 13%, but can depend on the mix. There's some mix that is less volume, high value, but it depends on that. But you can consider 10%, 13% in terms of volume capacity growth. Operator: Your next question comes from Benjamin Theurer there with Barclays. Benjamin Theurer: Yes. Just following up real quick on the CapEx side. I think you said about $1.4 billion for expansion. I mean, I know there is a lot that Pilgrim's Pride has part of that and share of it with their outlook in terms of CapEx. But could you remind us a little bit about some of the other projects you're currently talking and working around as it relates to capacity expansion aside from what Tomazoni just mentioned on Seara. That would be my first question. I have a quick follow-up as well. Guilherme Cavalcanti: Ben, so basically, the Pilgrim's Pride expansion on the prepared food parts on the rendering facilities, the pork sausage plant in Iowa. But the ones that we announced. Also the Oman project, we also announced a plant in Paraguay. Cactus, Texas, also on the beef side, so everything that we've been announcing. And of course, all these capital expenditures are phased out throughout the years, and that's the portion for 2026. Benjamin Theurer: Okay. Perfect. And then as you kind of like look from just general capital allocation, I mean, obviously you announced the $1 dividend per share in the very large CapEx program. We're seeing a bit more activity right now as it relates to M&A activity within food companies in generally but particularly between European and North American companies. So just wanted to get your latest as to your willingness or the opportunities you might be seeing on growth through M&A, which obviously has always been part of JBS's DNA to grow . Guilherme Cavalcanti: We're always looking at opportunities through our plan everywhere in the world, but there's nothing that we are looking very keen at the moment, and that's the reason that we increased our organic growth because we are not seeing many opportunities on the acquisition front. So I think that I would say there's nothing that we could say that we expect to announce or anything in terms of M&A. So that's why we were -- we increased expansion CapEx, and that's why we are returning capital to the shareholders. And given that our net interest expenses continues to be at the $1.1 billion level, we are very comfortable with this capital allocation. Operator: Our next question comes from Thiago Bortoluci with Goldman Sachs. Thiago Bortoluci: Congrats on the results. I have two follow-ups. The first one this is on volumes, right? Tomazoni, you have been very vocal on the solid momentum for global protein markets. And to be honest, when I look over the last few quarters. Obviously, a lot of debate on the margin cycles, but volumes and top line has been consistently surprising everyone to the upside. And I think it might be a continuous source of upside going forward. It's difficult to break out for us your sales component between volume and pricing. But internally, from a volume perspective, could you please share with us what business unit segments and destinations are the ones that are contributing the most with your growth and which regions make you more excited with the opportunities for 2026. Particularly, if you could also comment on the opportunities in Africa. I know you announced a few things last year. Just an update here, and then I can follow up with my second question. Gilberto Tomazoni: Thiago, thank you for your question. If I understood well, you talk about Seara or you talk over about... Thiago Bortoluci: Volumes. Overall. Gilberto Tomazoni: Okay. Overall. Okay. Overall, we see that the demand, when you say all of the market, it's not just because we try to simplify, but it's the reality. We have a strong demand in Europe. Friboi increased a lot of the sales of red meat in Europe as Seara increased in volumes in Europe. And the demand in chicken in Europe mainly is driven by some influence in some countries. And the demand for beef is because the beef production in Europe decreased. And I think it's not just Brazil, sell more in Europe and Australia sell more. And in Australia and the U.K., now they have a new agreement. And this is -- the demand is -- we are expecting to grow the demand from beef in Europe. The other part, we see demand in all of the Asia. Take China out of this the component of Asia, but all of the Asia, the demand is growing for chicken. And for beef as well, we see the demand and the market -- this is not new markets. We open a lot of new markets, but in traditional markets like Japan, like Korea, we increased the volume from the market. And I believe this is the trend. It's not a trend because price. It's a trend because the demand decrease in the local production decreased, decreased because of the cycles there or because of some disease in the market. We see Middle East now we are facing a war there, but the flow of the product to the market didn't change so far. They changed the logistic of vessels there, the logistics of internal logistics, we need to change port and when you change port, we need to use trucks to deliver the product to the customer. But the flow is still there. The demand is there. Because of this, we are investing in the Middle East, new factory opened some months ago in Jeddah and the investment we have announced in Oman because the demand is strong. The U.S., there is a strong demand for beef as Australia, Brazil, sell a lot streamers and from U.S. When we say a lot more than before, I would not say compared to the production in the matter. Sales compared to what previous forecast. If you look, we are not seeing that one market is the restriction. We see the demand for all of the markets. Even in Brazil, the demand in Brazil for protein is high. Look for what is the -- how Brazil have grown in terms of the number of fed processed in Brazil is amazing. And what is this? This is because the global demand for protein because there is a reason we have been talking before about that. There is a trend it's not a trend, it's a structural change in the demand of the market because of regulatory guidelines in U.S., they change the guidelines and they put -- they need to add more protein to need to go to 1.1 grams per kilo per 1.62 grams per kilo. You can manage how much we need to produce to fulfill this market that we -- that there is a lot of the health habits that for young generation for old generation, there's a new medicine technology, this GLP-1. And combined all of this, the demand is very high, very high. I don't know if I answered your question, Thiago. Thiago Bortoluci: Perfectly, Tomazoni. This is very helpful. On the second one, still talking about the conflict in the Middle East. Obviously, this is an ongoing situation. But could you help us framing the impact so far in your freight expenses -- and by freight, I'm mentioning seaborne freight, but also truck freight in Brazil and maybe a sensitivity of how this could impact your profitability if sustained going forward or how you plan to pass this along? Gilberto Tomazoni: Thiago, I think I just mentioned before, the flow, the product to go to the market didn't change. Didn't change from Brazil. Didn't change from Australia and any of the other markets didn't change. We keep supplying the market. We have -- what we saw the growth -- the cost, we have a contract with the marine agents and they put extra cost because of the risk to navigate in these regions. And this is one of the cost. The second cost is the cost that we need to change the port -- some -- the destination of the product, some destination will change from one port to the other port. And when we change the destination for the different part, we need to have the truck transportation because to there is not -- there is no closer to the customers, then we need to have this cost of transportation. But so far, this -- all of these costs was beared by the market. We not see impact in our results. Thiago Bortoluci: This is also true in Brazil. Tomazoni, with diesel prices. Gilberto Tomazoni: No. In Brazil, we see the increase of price of diesel. And we see that increase in terms of the cost of freight. I talk about the Middle East, but when you look for Brazil, yes, you are right, increase the cost of the freight. I think if the crude oil keep this price and depends on how far the development of this war, I believe that other costs will be increased, the cost of packaging and what is depend on the oil will be increased as a raw material. I think this will be the impact, I think, the fertilizer will be impacted, and then it could be -- then I mentioned before, when they talk about the cost of the corn because the fertilizer will be higher, the availability of fertilizers, maybe the use of fertilizer will be reduced and then the productivity of the crop will be low. But it's -- I believe it's too early to predict. Too early because you don't know how will be the end of this war. I think this is -- I saw this impact in the short term, but could be back if they end the war. I think it would all be back. It is -- I think this is a situation that we are -- how we are looking and act in this situation. Operator: Mr. Benjamin Mayhew from Bank of Montreal would like to ask a question. Benjamin Mayhew: Can you hear me okay? Yes. Gilberto Tomazoni: Yes, good morning. Benjamin Mayhew: So a lot has been covered already, but I'd like to ask a high-level question to begin. So in looking at 2026 versus 2025, just across your global segments, where do you see pockets of improved market fundamentals and where do you see pockets of maybe not so strong fundamentals throughout the year? So we'll start there. Gilberto Tomazoni: Ben, thank you for your question, Ben. I think it's a rule of improvement we've seen in all of our business units because we have a methodology that mapping the gaps. It's a one of the model that we work. All business units need to understand, need to know very well, where is the opportunity to improve, then we call mapping the gaps and when you look -- when you have the budget, we go there and see the gaps, and we forecast in our budget, some gap up in the -- each one of the operation. And it's not just for the business, but -- we got the business because we deploy each one of the process and subdivisions of the business. That is when you look -- if you look it's a huge opportunity we have yet because that new technology, a new way to do the things. We are closing the gap. We open a bigger gap, and this is the way that we see -- or get operational excellence. I think this is the mentality and the mindset for all of the business. But if you go to a structural, we see that Brazil is 1 of that has a huge opportunity for growth in terms of meat, beef in Brazil, I think, is if you compare Brazil and U.S., brazil has more than double of the [indiscernible] than U.S., more than double. And we produce just this year or last year, Brazil produced a little bit more meat than U.S. It means that -- if we are able to get the same productivity in the U.S. or can double the production in Brazil of meat. Then we see Brazil in terms of red meat huge opportunity in the future for growth. But it's not just for growth [indiscernible] all of the protein produced in Brazil is very competitive because we are grain competitive in terms of the cost of the grain. We are very competitive. We have good quality management. And I think it's -- Brazil is one. We see U.S. good opportunity. Chicken U.S. performed so well, and we see that demand in the U.S. for chicken grow before U.S. export a lot of red meat [indiscernible]. Now I think it's a huge chunk of the volume for red meat is [indiscernible] in the market because they start to appreciate the product made by red meat from chicken, say, leg meat. This is I think in U.S. is an opportunity for growth for chicken for pork demand. In U.S., we have -- if you look for the result of our pork business, they are a very consistent results for a long period of time, well managed business. And we see that we can grow in our pork business because U.S. is very competitive to produce chicken and pork. So look, it's difficult for me because I'm booming in all of the markets that we are present. Australia, we see -- we are very excited with the pork business there. We are delivering a great result there. The Australia import -- Australia now import pork meat but Australia export grain. When you export grain, the price of grain is international price, that does not make sense that you export grain in pork meat. You can produce meat there. And we are investing in our pork business, build farms and improving the operation, the productivity of the operation. Then we are so, so excited with the opportunity for Australia. And our salmon business, we have announced an investment to improve more than 50% of our capacity of salmon in Tasmania. So we see Europe. Europe, I think, is an opportunity of our growing chicken, mainly in chicken and value-added. We are excited because we are in a segment, in a sector that is growing. It's a protein. And we -- we have our global platforms that we can easily meet this demand, I think is -- we have a good situation an advantage to take the opportunity and transform this opportunity result to the company. And I think it is -- I don't know if I answered your question . Benjamin Mayhew: Yes, you did. And I really appreciate all the detail. That's very helpful context. So my second and last question would just be around the beef cycles. Just wondering if you're seeing a little bit more progress on U.S. heifer retention. So wondering about that. Also, curious about your thoughts on the durability of the Brazil cycle and then, of course, the Australian cycle. So if you could just kind of summarize that quickly, that would be amazing. Wesley Mendonça Filho: Thank you, Ben. So yes, we are seeing the herd review more actively in Canada. We're seeing that in the dairy business as well in the U.S., which also obviously impacts the overall supply. When I look at the USDA data, it shows that I think we are retaining heifers, but it's relatively slower than we expected. But I think it's -- all the economics are there, everything should be there for us to be doing that. Actually, I have an information that's pretty interesting is the beef cow slaughter in 2025, for full year, we processed 2.3 million head. In 2022 was 3.9 million heads. So we're almost half of what the beef cow slaughter was in 2022. I think those things -- that information is important, and it shows that if it wasn't for -- to keep more females for breeding, we wouldn't see such a sharp decrease in -- it's almost half of what it was in 2022, not too long ago. So I think that there is some information that kind of makes us more optimistic, but obviously, it's lower than we would wish. Gilberto Tomazoni: Then related to Australia, we see we are in the middle of the cycle in Australia. And back to Brazil. Brazil, we see that the reduction of production in terms of the number of cows but the other side, we have a different force. The Brazilian -- if you look Brazilian and compared to U.S., or compared to Brazilian -- cannot need to compare to U.S. You can compare it for the high level of productivity in Brazil producers and the average of Brazil. The average of Brazil, they bring to harvest if at 4 years age in -- but the good producer or the modern farmers. They live 2 years to get the product finished, to get the cattles finished means that at the same time, we have a reduction in the age of the cattles. And this combined with increased a lot of feedlot in Brazil. The feedlot in Brazil was not well developed. Now you can see a lot of feedlots in Brazil. And the other part, we have an improvement in genetic improvement nutrition the Brazilian ethanol, corn ethanol industry, now they deliver good byproduct from the ethanol that is DDG, it is support a lot to grow the growth of improvements in feed. We see that we are -- I think Brazil will be able to manage this situation and postpone the cycle, the cattle cycle, that is normal cattle cycle. Operator: Our next question is from Heather Jones with Heather Jones. You may now go ahead and Mrs. Jones. If you're trying to speak you might be on mute there, Mrs. Jones. For the moment, we'll move on to the next question on the list, which is Leonardo Alencar from XP Investimentos. Mr. Alencar? Leonardo Alencar: I'd like to go -- wanted to talk back to U.S. beef discussion. And then we mentioned many points on the supply side. I wanted to focus probably more on the demand side. So if we can get -- First, a view on the resilience of beef prices. We've been seeing some amazing beef prices in the beginning or even before the spring season. So just to understand if you -- this is this is feasible or even if it's possible for us to expect higher price throughout the next few months. There was an interesting change in choice and select spreads. I don't know if there's any signal that point, if you could provide us with more information. And this discussion on the product of USA label, I understand it's really new. But if you have any early -- any views on that would be interesting as well. And then on the second point, maybe more like an exercise here. I understand that we've been discussing value-added products and processed goods and that U.S. is the main focus for that. But you already have a lot of revenue on that channel. If we split that from the commodity business in U.S., would you say the performance for -- even from the end of 2025 or 2026, maybe better than the commodity business. It is possible to do that exercise? Wesley Mendonça Filho: So demand is -- it remains pretty strong for beef. Obviously, supply is pretty short. But it seems like beef continues to be very resilient. It seems like ground beef is especially ground beef. We've always measured ground beef versus chicken breast versus pork loins. And it seems like the demand for beef in general, just there is -- obviously, there is a little bit of a substitution with other proteins, but the demand for beef stays still remains and remains pretty strong. So we see that going forward. And all these labor requirements and all that, it's something that we're always -- whenever something changes, we discussed with our retailers and see what our customers and see what are the impacts and cost of that. But it's not something that I'm super concerned right now. Leonardo Alencar: Okay, in the value-added products? Wesley Mendonça Filho: Sorry, that value-added question was about which business unit? Sorry, I missed that. Leonardo Alencar: Exactly not related to a business unit. If you could split, remove or suggest value-added products and remove from the commodity business, would you say 2026 is expected to be better or not on that part of the business? Gilberto Tomazoni: Look, our focus is to increase value-added, in brand is the focus that investment, if you look for an investment we have done in the past, we prioritize the value-added product. And because it's we take the advantage of verticalization of the product. And the second 1 is a higher margin and more stable market that value add is one of our priorities. Leonardo Alencar: Okay. And just 1 more follow-up here. On this split up deal that was being discussed in the U.S. government, I understand it's more noise than anything, but any comments here? Wesley Mendonça Filho: It seems like it doesn't have a lot of support in the -- so right now, it's not something that we're concerned about, Leonardo. Operator: We have Mrs. Heather Jones back online, if you would like to go ahead with your question Mrs. Jones. Unknown Analyst: Are you able to hear me now? Gilberto Tomazoni: Now, yes. Operator: Seems we have some connection issues on Mrs. Jones' side, so we'll continue for now with our next question from Guilherme Palhares with Santander. You may go ahead, Mr. Palhares. Guilherme Palhares: Over the last couple of years, one of the main points here of the investment thesis of JBS has been a bit of the geographic diversification, right? And you do report each of the businesses individually in terms of Australia, Brazil, the U.S. I just wonder if you could share a bit what is -- I think U.S. is a good indication there. In terms of the supply to the market, how much of beef meat in the U.S. is being sold through JBS. Do you know a bit how much do your selling today that it's coming from Brazil and Australia? Just to give the point here is a bit of food security, right? So having this geographic diversification, how much you can maintain supply even when the cycle conditions are not there. So if you could give us some color there, I think it would be appreciated. And the second question here, Tomazoni, over the last 2 years, you guys entered in a new protein, which is table eggs, of course, you still have a minority stake on the investment there. But I just want to hear a bit your thoughts going forward with this year behind you? What is your impression there? And how much -- how big is the opportunity there? Wesley Mendonça Filho: Sure. It's very relevant to have access to import meat from the Australia from Brazil when -- especially in periods of time when there is a shortage of beef in the U.S. So that does help, and it's I mean, and obviously, the volumes at Brazil and Australia produce are significant. So it's -- so it's -- there is not -- there isn't a supply problem when it comes to that. Having said that, the U.S. is a very, very, very competitive place in the world, probably one of the most competitive places in the world the American rancher is one of the most -- are among the most capable in the world to produce beef and high-quality beef. And so obviously, the shortage is a situational thing right now, but the U.S. it's a country that doesn't need to import in the long run, it doesn't need to depend on import. It doesn't need to have imports to be able to supply its own demand. It should be able to, in the long run, to be able to have its -- for the domestic production to supply its domestic market and actually be an important exporter of beef, like it's always been. Obviously, in the short term, we have the situation that we're importing a little bit more beef than usual. But -- and it's useful to have that when there is a shortage because the demand is still there. But the U.S. is a very, very productive place and doesn't need -- for beef and it doesn't need doesn't -- in the long run, shouldn't depend on imports. Gilberto Tomazoni: And Guilherme related to table eggs, we are -- we enter in the segment because it's -- we see that the affordability of the protein, so one of the more affordable protein in the market in and we before to enter we study these categories, and we are excited the first impression, the first movement we have done is to buy a company in the U.S. and to -- we are building farms in Brazil, we are excited with the business. This is one of the businesses you want to grow. Guilherme Palhares: Okay, Tomazoni. And just one follow-up there. You guys are also entering in the U.S., right? So what is also out there that you want to do on table eggs that you think it is a relevant market that you can play and make a difference. Gilberto Tomazoni: Look, we just buy this farms in U.S., and we are without I would say that the population of the chick. Now we are populate our farms and we are excited with this. I think is this -- we are on their strategy with both with Mantiqueira because Mantiqueira has the know-how and this accelerate all of our lands in the market. Operator: Our next question comes from Pooran Sharma, you may go ahead -- with Stephens, you may go ahead, Mr. Sharma. Pooran Sharma: Can you hear me okay? Gilberto Tomazoni: Yes. Pooran Sharma: A lot of good content covered. So maybe I could just focus on the first question, maybe just on your U.S. pork business. We've been hearing from U.S. hog producers that they expect disease impacts to be the same, if not worse than last year. I was just wondering if you can kind of share what you've been hearing regarding hog disease pressure in the U.S. and if you would expect that to weigh in on margins in FY '26? Wesley Mendonça Filho: Yes, it could be. And the margin impact -- it's not necessarily that it's -- it depends on how and when it does impact, it doesn't necessarily mean that it's actually a negative impact. It could actually -- we could have a short term -- obviously, we're not expecting disease, and we don't want disease. And we do everything we can not to have them. But in the short term, you actually could have actually a higher -- given a shorter supply, you could actually have a better margin if that happens. Pooran Sharma: Okay. I appreciate the color there. And my follow-up, maybe just wanted to further on some of the comments you made about the listing on the NYSE. You mentioned stock has seen some liquidity and valuation benefits but that you're still expecting to get more. And in the past, you all have talked about, I think, index inclusions and the potential for -- to get into some of those and the timing to get into some of those. So I think as we're looking in FY '26, I was just wondering if you could maybe give us an update on what's out there in terms of inclusion on some of these passive indices? Guilherme Cavalcanti: Okay? So on the multiple side, if you look at our enterprise value EBITDA forward-looking, we are trading higher than we used to trade before the listing. So there was a multiple expansion already, but we still traded at a discount to our peers. One of the reasons is also the index inclusion. There was a research that was sent last -- yesterday from Stephens. Saying that according to what we released on our financial statements in terms of information of revenues and assets breakdown. We should be included in the Russell, which is next June, and it could bring around 14 million shares demand from passive funds. But it's out of our control. We cannot guarantee that but that's what is in the short term. On the longer term, at some point, most likely beginning next year, we will start to find -- to make files of 10-Ks and 10-Qs instead of 6-K in order to be eligible to the S&P family. So then I think 2027. So I think this year, Russell is the plan. Next year, the plan is to be on the S&P family. First on S&P 400. And once we reach it $22.7 billion market cap, that's the threshold for the S&P 500, although, again, it's not in our control. It's their committee decision for shares inclusion. Also worth mentioning that our average daily trading volume is 3x higher what it used to be before the listing. And the Brazilian investors fell to 10% of our free float. And the U.S. investment today, it's already 70% of our free float. Operator: And our next question comes from Ricardo Boiati from Safra. Ricardo Boiati: One. My first question goes to Wesley. I wanted to circle back to the U.S. business. You, in fact, already answered part of my question here, which related to the competitiveness of the U.S. ranchers, right? We are seeing very favorable conditions, right, for a faster herd rebuilding in the U.S. with the beef prices, the cattle prices. My question here would be exactly when you look from the ranchers' perspectives, right, we see some concerns that labor, even succession plans could be an issue for the ranchers longer term. You expressed a very strong positive outlook for the U.S. beef industry, which is very, very good. So I would ask you to elaborate a little further on the drivers for the industry especially from the ranchers' perspective, right? Is there anything that could prevent a more robust business expansion for the ranchers, anything that could be a risk in the horizon? So that would be the first question. And the second one, just more broadly looking at the current market environment. the risk environment globally. Does this situation here of increased volatility could imply an even more conservative approach when it comes to the balance sheet of the company? It's quite clear that the balance sheet is very strong. I mean, in terms of leverage, in terms of debt maturity, you already showed this in details. But the very short term, the current environment, does it imply an even greater conservativeness from your side or nothing relevant so far? Wesley Mendonça Filho: Ricardo yes, there is -- obviously, there is issues that are very relevant, succession is always very relevant, and labor and all that. But at the end of the day, I have a pretty simple view of this. It's the -- and obviously, like interest rates are relevant as well when it comes to herd rebuild, right, because you have to carry more working capital and livestock and all of that. But at the end of the day, I think it's pretty simple. The U.S. has the nature, has the culture, I mean in nature, I mean, like just environment, right, just the natural resources to do it, to have a thriving beef production, it has the culture to do it. It has the infrastructure like no other countries. So at the end of the day, we remain very optimistic about it in the medium long run. Guilherme Cavalcanti: In terms of balance sheet, I think it's worth mentioning that sometimes you should not look at the net debt absolute value itself. But not even on the net debt to EBITDA, I think it's where I mentioned that in the last 3 years, we increased our net debt in 8%. However, financial expenses stayed the same. So through like big management exercises, we've been able to despite increases in net debt to keep the same level of interest expenses. So our capacity of debt repayment didn't change. So as long as we have this comfortable debt capacity repayments, we have no -- not been needed any restrictions in terms of our return to shareholders or our growth given that we have discovered. And also, as I mentioned before, we don't have significant maturities in the next 5 years. which gives a lot of comfort that we don't need to go to the market at any interest rates. Our cash position is also -- we ended the quarter with $4.8 billion which is around $1.5 billion higher than what is our minimum cash given our cash conversion cycle. So again, we have a lot of questions that currently, we don't need to be restricted in any of our initiatives. Operator: Our next question comes from Igor Guedes with Genial. Igor Guedes: Can you hear me? Gilberto Tomazoni: Yes. Igor Guedes: Okay. I would like to talk a little about Seara. Regarding the first part of the question, this quarter, we saw a resumption of shipments to China after several months of suspension due to avian flu last year. I'd like to understand how the resumption went for you guys? The resumption happened around November. So it didn't cover the entire quarter for Q1 '26, should we expect an even stronger quarter in terms of volume? Is this recovery gradual? Or do you believe the full effect has already being captured in 4Q? And the second part of the question, I'd like to understand from the perspective of breaking down the positive impact -- we have volume growth as well as price improvements realized through premiums paid on certain chicken cuts standard for China, such as chicken feet, given the increase in volume, there is also an effect of improved fixed cost dilution. So my question is, if you could break it down a bit, what we saw in terms of margin improvement what influenced it the most? Was it the increase in volume, the price improvement or the fixed cost dilution? Gilberto Tomazoni: Igor, is not a simple answer for you. If you talk about the volume to China, when opened this helped a lot in terms of profitability because we have the best market for chicken wings and for chicken feet is China. Then we increase in terms of -- we -- feed don't produce were not market to deliver all of the production. But then we do open the markets, they improve volume and improve price. And about wings, they improved the price because the value of the wings in China is higher than the other markets, means that we are -- we got part of the benefit because it was in November, I think it was October, November, and now we have got the benefit in the -- in this first quarter of all of the benefit. When you talk about what is important, the cost of dilutions of price, of course, the impact of the feed, it's a huge impact in terms of profitability because these represent 60% of our cost of chicken goes to feed, around 50. This is huge that is more than to get increased the volume to compensate this is, of course, volume compensate but not able to compensate all of these costs. Operator: Our next question comes from Priya Ohri-Gupta with Barclays. Priya Ohri-Gupta: Great. I hope you can hear me. A lot of questions have been asked at this point. I would just like to ask 2, first, around just the capital allocation. You've already announced the $1 dividend per share that's going to be paid in June. That works out roughly to what you've been indicating for some time now around the ability to consistently pay about $1 billion to shareholders. Is that sort of how we should think about the dividend for the entirety of the year? Or is there room to potentially increase that with a second payment later in the year? And then relatedly, how should we think about share repurchases? Just given that you guys did do about $600 million in '25. And then I'll ask my follow-up. Guilherme Cavalcanti: Priya. So at this moment, we are sticking to what we will try to do as long as our leverage ratio allows to have the $1 billion per year in dividends. So I think this $1 billion is what we plan to pay this year. And then depends on how much excess cash or cash flow generations, then we can reevaluate a share repurchase again or not. But that do depend on the cash generation in the next quarters. Priya Ohri-Gupta: Okay. Great. And then I know you're pretty clear just now about not having any maturities in the next 5 years or so, and so you don't have any real need to come to market. But some of your bonds do become callable later this year and into early next year. Is there a scope for you to think about addressing those or consider other liability management? Or is this the rate backdrop that -- or would this rate backdrop not necessarily went? Guilherme Cavalcanti: Now the callable bonds, they have very low interest rates. So it's not worth it. The coupons are below treasury. But there's opportunities to decrease interest rates and extend maturities on the '34 and '33 maturities. So maybe I think -- it could be -- liability management could be targeted on those 2 bonds, '33 and '34 which has high coupons and higher than what we could be issued today at 30 year, for example. Operator: And next, we have Mr. John Baumgartner with Mizuho. John Baumgartner: Two for me on North America. First, on the value-add side. I mean traditionally, there's been a focus on value-add through M&A. More recently, you've gotten involved in CapEx to build the Italian meats business. But I am curious, alternatively, I know you had a relationship with Wendy's. You had done some test marketing of Wendy's burgers last summer. I'm curious what you sort of learned from that test market? And how you think about maybe licensing third-party brands to get those value-added brands in-house in lieu of making expensive acquisitions or even investing to build brands from scratch? Wesley Mendonça Filho: So look, we're looking at we obviously look at every option. For us, greenfield has made more since recently just because of valuations and the price of building some of these things. And actually, some of these businesses that we did greenfields. It's better to do to have a new plant instead of buying old assets. And so that was very specific to those greenfield acquisitions or greenfield projects, sorry. The project we won is what was very interesting was very -- it worked out well, and it's great partners. But it's an option as well, but it's not -- we'll look at that, too. But we've seen that it's not necessarily, as you mentioned, expensive as kind of prohibited to build brands. Look at what we've done at just there, right? It's we never had an the earnings call or Pilgrim's hasn't had an earnings call that they said that they were -- had invested -- the results were good for 1 reason, had a negative impact because we were building brands, right? We build brands as we build the business and it was sustainable in itself. So nowadays is a $1 billion brand. So it's in revenue. So I think it's possible to do those 2 things at the same time. John Baumgartner: Okay. And a follow-up also in North America. Guilherme, I think you mentioned there's really no imminent M&A on the horizon here, but I am curious on the egg industry, seeing where prices are for eggs, I'd imagine there's a fair amount of distressed profitability in the industry. I'm curious, looking at producer capitalization, that business specifically relative to beef, pork, other species, where you've made acquisitions at the down trend -- the down point in the cycle. How do you think about this profitability issue in eggs right now, maybe accelerating your ability to build out and maybe be opportunistic and acquire some assets in eggs. Guilherme Cavalcanti: John. So basically, it all depends on having the opportunity at the asset price. So sometimes it's not related to the current egg price and we're always looking at opportunities. So it's difficult to say and then that's our approach. It has to be an accretive acquisition. Operator: Ladies and gentlemen, there being no further questions, I would like to pass the floor to Mr. Gilberto Tomazoni. Gilberto Tomazoni: I would like to thank everyone for joining us today and all JBS team members for their dedication, the commitment to deliver the results. Let me close with 3 key points. First, though, we delivered record revenue of $86 billion and 13% growth for the prior year, reflecting the strength of, and the consistent of our global platform. Second, return, we continue to operate with a strong capital discipline with return on equity at 25% and return on investment cut out at 17%. Third, earnings per share, EPS reached $1.89, up 15% year-over-year, growing faster than net income and reinforce our focus on shareholder value. As we look ahead, we haven't changed our focus, execution, efficiency and disciplined capital allocation. That is what allowed us to deliver consistent results and build long-term value. Thank you. Operator: This is the end of the conference call held by JBS. Thank you very much for your participation, and have a nice day.
Operator: Good morning, and welcome to the Genel Energy plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Paul Weir, CEO. Good morning, sir. Paul Weir: Good morning. Good morning, everybody. My name is Paul Weir, as you've just heard, I'm the CEO of Genel Energy, and I'm joined as usual by our CFO, Luke Clements. Welcome to our 2025 results presentation. We published our annual report and our full year results last week. And in my statements, then we broadly reiterated the key messages and guidance provided in our January trading statement. Obviously, the big change since January is the security situation in the Middle East, which has resulted in our production effort being temporarily suspended on a precautionary basis since hostilities began almost 4 weeks ago. Understandably, the operator's priority since then has been the safety of its personnel. Steps have been taken, however, to maintain a state of readiness for a prompt restart, but the security situation in the region remains very dynamic and very uncertain. The focus of this presentation then is not to provide you with the Middle East security update, which wouldn't likely add to the understanding you've already had from mainstream media. Instead, we will take you through the key elements of the performance of the company in the last year, the current position of the business and the catalysts and priorities for '26. Luke and I will work through these slides. I think there's 10 or 11 basically. We'll work through those fairly briskly, and then we will be very happy to take any questions that you submit during the course of the presentation. We start with an overview of the business, and this slide pulls together some key metrics to outline the building blocks we now have in place. We ended the year with a daily average working interest production rate of around 17,500 barrels per day. Net 2P reserves of 64 million barrels and a net cash position of $134 million. EBITDAX was $43 million. Our barrels are low cost with a low emissions rate, well -- industry average target rate for 2025, which was 17 kilos per barrel and with world-class operating costs at around $4 a barrel. Even in a year that included significant production disruption at Tawke and continued domestic market pricing, the business has remained resilient, cash generative and well funded and with the potential for very significant value uplift. The key building blocks for that significant value uplift are listed at the foot of this slide. The Tawke PSC, our world-class production asset generating material free cash flow even at domestic sales prices, a significant cash holding of more than $220 million at year-end and about the same right now, ready for deployment and a portfolio with significant organic upside potential from exports resuming, Tawke drilling resuming, Oman appraisal and Somaliland drilling, all of which supports our ultimate objective of getting back to a regular dividend in time. Once we've established some geographical diversity and the further resilience that follows that diversification and repeatable cash. On to the next slide, please. This slide sets out our strategy and strategic objectives in the way that we think about them every day. The 3 familiar boxes on this slide represent our objectives in simple terms, and I've spoken about many times before, so I won't dwell on them too much. Firstly, maintaining a strong balance sheet; secondly, maximizing cash generation from the assets we have, which means investment in Tawke and resuming exports from Kurdistan. And finally, adding some new sources of cash flow in a disciplined and value-accretive manner. That order matters, but we need to do a good job in all 3 of those areas if our eventual aim to return value directly to shareholders in a regular way. Let's move into the detail on the platform now. The world-class characteristics of Tawke are well known, but 2025 again demonstrated the resilience of the combination of the assets and its operator, DNO. If you look at the production graph on the right-hand side of the slide, you can see quite clearly the effect of the drone attacks in Q3 of last year. And thereafter, you can see just how quickly production was restored to a production rate at the [indiscernible] of the year of around 80,000 barrels a day. It's also worth noting that production in the months not impacted by the drone event was actually higher than the 2024 average despite no new wells contributing to that production rate. Drilling restarted then in Q4 of '25. First Tawke well was spudded in December and immediately started delivering results. A second good production well followed in the same month, but the 2026 drilling campaign for which 2 more rigs have been mobilized to site has now been suspended given the security situation. So today, we're in a position where both production operations and the drilling campaign are temporarily suspended, and we remain on standby until such times as the operator determines that it's safe to reestablish a full presence at site and resume activity. We remain close to and very supportive of the operator on that. All that aside, when we talk about Tawke as a world-class asset, we mean 254 million barrels of gross 2P reserves, very low operating costs, low emissions, long reserve life and clear upside from drilling. Right, I'm going to pass you on to Luke now for the next couple of slides. Luke Clements: Thank you, Paul. Good morning. This slide provides the buildup of what we call production business netback. Production business netback is revenue less production asset spend. That's both OpEx and CapEx, less G&A. It tells us what funding our business is generating and making available for capital allocation outside of the Tawke PSC. And you can see that it has been double-digit millions for 2 years in a row now, having been negative in 2023 despite similar levels of revenue. So you can see that we've been working hard on our spend. So what was the income side of that double-digit production business netback made up of last year? Firstly, while Brent averaged $69 a barrel in 2025, our realized price sold was $32 a barrel with all production sold domestically. If we were exporting, we'd expect that realized price to be close to Brent. Secondly, working interest production averaged 17,500 barrels a day, lower year-on-year only because of the drone-related interruption in Q3 that Paul just mentioned. And finally, EBITDAX of $43 million. You can see our underlying EBITDAX is back to more normal levels for domestic sales at around $35 million for the past 3 years now. This underlying number excludes movement on arbitration cost accruals, which negatively impacted '24 and positively impacted '25. So the key point here is that the production business is now delivering consistent double-digit netback even at domestic sales pricing, while still funding all production activity and investment on the Tawke license and so building our balance sheet cash position and available funding. That is the product of Tawke resilience and the discipline we've applied to the business since 2022 in simplifying the portfolio, stopping non-value accretive spend, exiting licenses and reducing cash G&A. Next slide, please. This slide illustrates our balance sheet strength. We finished the year with $224 million of cash, the net cash of $134 million and gross debt of $92 million. Our cash is about the same today as it was at the end of the year, so it's around $225 million. In April last year, we issued a new 5-year bond maturing in 2030, replacing the bond that had been due to mature in October 2025. That issuance was oversubscribed, and we continue to see good support and appetite for our bonds. That issuance has reduced funding risk around delivery on our strategic objectives. This remains a very underleveraged balance sheet with significant headroom to fund investment. That matters because the cash and capacity for further debt provide us with significant optionality. We can fund the appropriate Tawke program, progress our organic growth assets and pursue value-accretive acquisitions without being forced into decisions by capital structure pressure. Next slide, please. This slide shows our primary capital allocation options when we consider the best way to deliver shareholder value. Our first consideration is to maintain the strength of our balance sheet. Then the best place to invest our capital, providing the instant significant returns is the Tawke PSC. Then we think about how best to diversify our cash generation. All 3 building blocks have to be properly managed to establish a sustainable dividend. That means not every potential project will automatically be funded and not every acquisition opportunity will be pursued. Every value creation opportunity has to compete with others within our strategic framework. The Board reviews capital allocation on an ongoing basis, and we take care to remain disciplined. I'll hand back to Paul now to talk about our acquisition strategy. Paul Weir: Thank you, Luke. So look, we want to add resilient cash-generative production or near production assets that reduce our reliance on one asset in one geography. We want something that complements what we already have and supports long-term shareholder value. During 2025, we were very active. We originated, developed and actually bid on a number of opportunities. We were involved in bilateral discussions and in broader processes, too. We've looked at opportunities within our current region and further afield. And to be entirely frank, although it's early days still, 2026 is already shaping up to be as active as 2025 was. Having said all of that, there isn't an abundance of suitable opportunities, and there's a great deal of competition for the good ones that are available. So we continue to diligently scan the deal horizon. We're trying to avoid being distracted by the current unsettling events. Patience and discipline are key. Finally, on this, and again, as we've made clear in previous presentations, we will resist overpaying to get short-term positive market reaction only to find over time that the assets that we buy are unable to deliver the value that we need. We remain very confident that we will secure the right opportunity in time. On to Oman then. On Block 54, the initial activity set did exactly what it needed to do. The reentry and testing of the legacy Batha West-1 discovery well was completed safely ahead of time and under budget. That was a low cost and very useful first step in understanding the block better. Our block is adjacent to the prolific Mukhaizna field, and we are targeting reservoirs that are proven in that neighboring field on another adjacent block, Block 4 and on legacy well logs from Block 54 itself. The immediate focus now is not to rush to a drilling location decision. Instead, we will use the data from Batha West properly to reprocess existing seismic and to acquire new 3D seismic in the most efficient and cost-effective way that we can, so that the joint venture can identify the best locations for the 2 commitment wells that we will now drill on the block. That's the right technical sequence, and it's also the right capital allocation sequence. And based on current planning, we expect those commitment wells to be drilled early in 2027. So Block 54 is exactly the kind of exactly the kind of organic opportunity that we like, modest initial capital outlay, a clear work program, data-led decision-making and meaningful upside if the subsurface case continues to strengthen. And on Somaliland on the next slide. In Somaliland, the opportunity remains for a material discovered resource addition from our existing portfolio, and we've seen steady progress towards drilling the highly prospective Toosan-1 well. Toosan-1 targets best estimate prospective resources of about 650 million barrels across multiple stacked reservoir objectives. As the first mover, the commercial terms are also very attractive, meaning that even a modest discovery would likely be commercial. Of course, wherever we find logistically will benefit from proximity to the Berbera Deep Water Port on the Gulf of Aden. In terms of drilling preparedness, the majority of the civil engineering work is complete and most long lead items are already held in inventory, but we will remain quite measured in how we talk about this. There's still work to do. That work is ongoing, and there is still a need for operational, commercial and geopolitical elements to all come together. The key takeaway for today is one of continued progress towards drilling, while we continue to invest in the well-being of our host communities there to further strengthen our social license to operate. On the next slide, we'll -- we can see -- we can sort of give you a flavor of the work that we carried out last year and through into the first quarter of '26. We've been proactive in the areas of mother child health care, educational facilities and conservation projects. And we've been reactive. Very importantly, we've been reactive in response to the very severe drought conditions that the region is now suffering. Genel has recently distributed around 9 million liters of fresh clean water in the area of our SL10B13 license. Okay. So I think we can wrap up now. This closing slide returns to our 3 strategic pillars. Firstly, maintaining a strong platform. That means protecting the balance sheet, keeping the business efficient and being careful about how we spend our money. Secondly, maximizing cash generation. That means cost consciousness, executing the Tawke drilling program well, pursuing the net amounts that are owed to us and positioning ourselves to participate in exports when the conditions are in place -- when the right conditions are in place. And finally, diversifying production and free cash flow. That means finalizing and executing the right plan for Block 54 and continuing to progress Toosan-1 and Somaliland. Most importantly, it means continuing the disciplined pursuit of value-accretive acquisitions. Those are the building blocks. They're fairly straightforward. They are mutually reinforcing and they remain the right framework for Genel's value delivery. If we execute well, we continue the journey towards a business with resilient cash flows that can support a regular dividend for our shareholders. That's our clear objective, and we are determined to get there. So thank you. That was a relatively brief run through the slides, but I want to thank you for your time this morning. Luke and I will now be happy to take any questions that you might have. Operator: Paul, Luke, thank you both very much for your presentation. [Operator Instructions] Guys, as you can see we received a number of questions throughout today's presentation. Could I please hand back to Luke to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Luke Clements: Thank you. So there's a few questions on security in Kurdistan, Paul, and how quickly we can restart production. I think as you said at the start, we're not really going to comment on security in the Middle East and Kurdistan because it kind of changes all the time. There is a question about once you do restart production, how quickly can you get back to pre-conflict production levels? I think it is worth you answering, Paul. Paul Weir: Well, I think we can get back to preproduction -- pre-conflict production levels very quickly indeed. I mean it's worth pointing out, and there is a little bit of an overlay here into the security question. We've shut down as a precautionary measure. We haven't been targeted, and we haven't suffered any damage during the course of the current conflict, although obviously, there's been quite a lot of ordinance heading into Kurdistan. It's not been headed at us. The point being that when we do sense that the time is right to restart all the equipment there and functional. The operator has been working cleverly to make sure that we maintain a state of readiness. And as soon as we can get boots back on the ground, we can get production away quite quickly. So I'm confident that we can resume production levels pretty quickly within a week or 2 of giving ourselves a green line. Luke Clements: Okay. So staying Kurdistan on exports. We understand that the Tripartite deal has been extended to the end of June. Has Genel approached MNR to join the deal? Paul Weir: The answer to that is no, we have not approached MNR to join the deal. I think we've made our position on the current export arrangements quite clear, but I'll repeat them just now. A number of our peers elected to participate in that arrangement. We chose not to do so. We wanted to make sure that all of the conditions within the deal were on fully before we felt able to commit to that. Primarily amongst those conditions, of course, is the top-up payments that would actually render the participants hold with respect to the PSC. So we would want to see that before we elected to try and join the current arrangements. In the meantime, we would continue to sell our product locally. Luke Clements: And there's a kind of related question, which you've kind of answered, how are other operators being paid through the pipeline. I mean, for me, Paul, that's really for others to comment on. It looks like the first part of that is working okay. But as you alluded to, we -- the top-up payment hasn't been expected yet and hasn't been paid yet, I think, is the right way to think about it. Paul Weir: Agreed. Luke Clements: Are you still a member of APIKUR? Paul Weir: Yes, we are still a member of APIKUR. Obviously, when some of the APIKUR members elected to participate in the export or the arrangements that were in place up until the facility stopped. When some of the APIKUR members elected to participate in that arrangement and others chose not to, APIKUR essentially divided into 2 counts, but APIKUR remains the trade association. It remains the forum where all of the IOCs within Kurdistan can talk together. And we have a directorship there, and we remain a part of APIKUR. Luke Clements: Okay. Moving outside of -- sorry, one more on Kurdistan. Any update on court case costs? Paul Weir: No, there isn't. And next month, our appeal against the award of the other side's costs goes to court, and we're waiting to see the outcome of that appeal before we engage with the authorities on that matter. Luke Clements: Okay. So now as on Kurdistan. How quickly can new assets? And I don't know if that means the organic portfolio or newly acquired assets, but how quickly can new assets meaningfully reduce reliance on Kurdistan? Paul Weir: Well, those new assets, if we're able to secure the kind of asset that we're looking for, those new assets can immediately reduce our reliance in Kurdistan because it's a production asset, then we benefit from a new income stream immediately. So certainly, first prize for us is securing an arrangement that gives us an alternative cash flow as soon as the transaction is completed. As far as the other -- as far as near production assets are concerned, if we were to go down that route, then it would be entirely dependent on the nature of the deal we were considering. I couldn't give a time line on that. Luke Clements: Yes. I'd just add, we've always said we want to do a bigger deal rather than a smaller deal. And you can see the cash pile we have on the balance sheet. And you can assume that an asset we acquire would have debt capacity on it as well. So you can see if you're spending that kind of money, you should be able to achieve some meaningful diversification of your cash generation. I think you probably already answered it, but can you provide an update on Toosan-1 in Somaliland? Any specific milestones before spud? Any specific time line that we want to set out? Paul Weir: No. I think I appreciate there'll be a great deal of curiosity around our progress in Toosan-1 because we talk about it and from an outside-in point of view, it may at times be difficult to see progress, but work does continue, and we are quite active on that front. Engineering work continues and procurement work continues. We've been looking at the market to -- we have most of the long lead items in place, but we've been putting together a project execution plan. We've been putting together a project plan. We've been trying to determine who are the best people to come in and help us manage that drilling campaign. And all of that continues as we speak, and we have people in-house dedicated to that task. And as with all projects of that nature, we have a stage gate process in place. So we will convene with the executive every time we reach a stage gate, and we will convene with the Board every time we reach a stage gate. And we will take a conscious decision to embark on the next stage of the process and be prepared to spend the money that's associated with that particular stage. We can't commit to a particular time line at the moment. As I said in the presentation, a number of commercial, operational and geopolitical pieces of the jigsaw need to fall into place together before we can actually define with certainty when things are going to happen. But work does continue, and we are committed to the cost. Luke Clements: Okay. Back to Oman. What is your estimate of drilling costs concerning the 2 wells in Oman? Paul Weir: Well, the wells are relatively shallow wells, and we're in an area that's well serviced by the oil industry. So services are readily available. We're competitive and they're relatively low cost. I wouldn't want to put a figure right at this moment for the well cost because, of course, that's determined to some extent by precisely where we want to drill, and we haven't determined precisely where we want to drill yet. But what I can repeat is what the cost of this entire project is going to be, and that's around $15 million over a 3-year period to Genel. That obviously started last year. So all the work that's taken place so far has been extremely well planned and very clearly executed and it's below budget. But we're expecting to spend a total of around $15 million over a 3-year period starting last year. Luke Clements: Okay. It looks like we are through the questions. Operator: Thank you both for answering those questions you have from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company. Paul, could I please just ask you for a few closing comments? Paul Weir: Yes. I mean I'll close, first of all, by thanking everybody for taking -- continuing to take an interest in Genel and for taking the time to listen to us talk about our business today. I just want to close basically by reiterating the 3 main points that we wanted to land during the course of this presentation and in fact, in all our recent presentations. The first is that we have a very resilient business, and our strategic priority is to maintain that degree of resilience, protect the balance sheet. The second is to emphasize the extent to which we have potential within the organic portfolio. Oman and Somaliland, both represent very exciting potential value builders for the business, and we continue to push forward with those. But of course, the biggest story and the biggest strategic thrust at the moment is making use of our cash pile. We've been sitting on that quite patient and are waiting for the right deal. But we continue to be very, very active in the M&A space, and we continue to be extremely confident that in time, we are going to find the right deal that's going to allow us to deploy that cash. So thanks, everyone, for your time. Thanks very much for the questions, and we look forward to talking to you with more good news. Operator: Paul, Luke, thank you once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of Genel Energy plc, we would like to thank you for attending today's presentation, and good morning to you all.
Operator: Welcome to the earnings call of Aumann AG regarding the full year figures for 2025. The company's CEO, Sebastian Roll; and CFO, Jan-Henrik Pollitt, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, I'm handing over to you, Sebastian. Sebastian Roll: Good afternoon, everyone, and thank you for the kind introduction. I'm pleased to have you with us today. And for those I haven't met yet, my name is Sebastian Roll, and I'm the CEO of Aumann. So joining me in the call today is our CFO, Jan-Henrik Pollitt. So we really appreciate your time and your interest in Aumann. In the next few minutes, we will guide you through a brief overview of Aumann, the latest developments in our E-mobility and Next Automation business and of course, our financial performance in 2025, where we delivered strong results in a challenging market environment. So let's start with a quick look at our business model. So we design and build high-end fully automated production lines tailored precisely to the needs of our international customers. With decades of experience in automation, industry leaders around the world trust Aumann to deliver innovative solutions. One of our competitive advantages is staying ahead, especially in fast-growing markets, enabling us to quickly provide customized solutions. This is why the automotive market, especially the E-mobility sector remains so attractive to Aumann. In addition, the robotics and automation market is growing rapidly, driven by demographic change, labor shortages and cost pressure. These trends also drive our Next Automation segment, allowing us to use our automation expertise in many industries beyond automotive. So let's take a quick look at Aumann's solutions. So our portfolio ranges from modular solutions and complex process solutions to fully integrated large-scale production solutions. At the modular end, we provide standardized cell systems. They enable our customers to adapt quickly and cost efficiently to changing market demands. Building on this, Aumann designs production lines for more complex processes, including technologies such as winding, coating and testing. The aim is to implement special process steps in the most efficient way. Moreover, Aumann offers fully customized large-scale solutions built to maximum output while ensuring high quality. Thanks to Aumann's wide range of solutions, we can fully support different production strategies of our customers. So this slide here shows how Aumann became a technology leader in E-mobility. Starting from the traditional automotive business, E-mobility was identified as a growth market. Through targeted M&A, Aumann took the first step into E-motor technologies. Building on our know-how, we developed different solutions for the rotor, quickly followed by solutions for the stator and finally, full E-motor assembly. After the E-motor, we leveraged our expertise to develop large-scale production solutions for battery modules and packs. In addition, we introduced our own modular systems, for example, in inverter assembly, but also very useful in the field of Next Automation. Furthermore, we have expanded into converting technology, enabling us to offer, in addition, production solutions for electrode manufacturing. Aumann is a leading provider of turnkey solutions in E-mobility. This illustration here shows the drivetrain of a fully electric car and most of these components can be produced on Aumann production lines. From the outset, we have focused strongly on the E-drive unit. Even today, our customers still use different approaches to stator and rotor design. As a turnkey provider, we offer the latest production solutions for both. Beyond that, we have expanded our portfolio with modular production systems, for example, for electronic components such as sensors or, for example, such as inverters. This enables us to offer flexible and scalable solutions perfectly tailored to each customer's needs. Let me now turn to our battery portfolio. Here, Aumann benefits from its strong position in energy storage. We cover the full range from battery modules and packs to cell-to-X solutions. This expertise allows us to meet customer needs and develop new solutions for next-generation battery technologies. Let's look at the E-mobility market today and in the future. BEV, or battery electric vehicle sales continues to gain traction. In 2025, more than 13.7 million were sold worldwide. So this means a plus of 30% in comparison to 2024. China stays in the lead with 9 million units, but Europe follows with strong growth, reaching more than 2.2 million units with 26% increase compared to 2024, including Germany with an impressive 43% growth. The U.S. market, which currently shows the lowest volume in comparison, remains at least stable at 1.2 million units. By 2030, BEVs are expected to make up 40% of sales by 2035, even 2/3. So overall, rising BEV sales and a more stable geopolitical situation are expected to drive new investments in the near future. So let us now turn to our key commercial focus in 2025. As mentioned earlier, we are expanding beyond the automotive sector and focusing more on industries that need greater efficiency, higher productivity and less manual work. At the same time, rising labor costs and the shortage of skilled workers are accelerating the shift towards automation. In this context, we have moved, as you know, our Next Automation segment from an opportunistic to a strategic approach. This segment focuses on growth industries beyond automotive, such as defense, aerospace and life science. So let's take a closer look. In our Next Automation segment, we have defined 3 strategic growth areas. Aerospace, as you know, is gaining momentum. Demand in civil aviation is rising. Boeing and Airbus are forecasting more than 40,000 new aircraft over the next 20 years. Against this backdrop, Aumann is preparing its reentry into aviation, offering solutions to support production ramp-ups with initial orders already secured in early 2026. At the same time, defense budgets are boosting. Drones combines exactly what we do best: electric motor, battery packs and full system integration, including end-of-line testing just like in E-mobility, same technology, new applications. Therefore, we easily developed integrated drone assembly lines and secured our first orders in 2024 (sic) [ 2025 ]. Besides aerospace and defense, clean tech is also good. Here, Aumann has acquired a double-digit million order in energy infrastructure, delivering flexible assembly and test lines for medium voltage circuit breakers. Finally, life science. So this sector benefits from long-term trends such as an aging population, strong investment levels and attractive margins. In 2025, Aumann entered the pharma market with solutions for producing skin delivered patches and oral thin films. Now I would like to hand over to Jan. Jan-Henrik Pollitt: Yes. Thank you, Sebastian, and also a warm welcome from my side. I would now like to share with you the financial figures of the year 2025. Let me start with a brief overview. We entered the year aware that revenue would face a decline, primarily due to a softer order intake in 2024. At the same time, we remain fully committed to implementing every possible measure to protect our margins and sustain strong profitability. It is also important to highlight, particularly in the automotive sector, that investment behavior continues to be very cautious. This trend is visible across the full spectrum of OEMs and suppliers. Against this backdrop, in 2025, revenue reached EUR 204 million, 35% below the previous year. Profitability remained strong with a double-digit EBITDA margin of 13.8%. Order intake totaled EUR 147 million, down 26% year-over-year. Order backlog decreased from EUR 184 million to EUR 122 million at year-end 2025. And our balance sheet remains robust with a net cash of EUR 148 million. With this foundation, let us now dive into the details. Across segments, we achieved a revenue of EUR 204 million, representing a year-over-year decrease of 35%. The main driver of this decline was the E-mobility segment, where revenue decreased by 37%. Revenue in the Next Automation segment also declined from EUR 53.8 million to EUR 40.2 million, mainly because the prior year included a larger contribution from a major photovoltaic project. For 2025, we had initially expected revenue of approximately EUR 210 million to EUR 230 million. Based on early projections in January, this estimate was refined to EUR 205 million. With the audited figures now available, we ended the year 2025 at EUR 204 million, closely matching this guidance. Looking ahead, we will now turn to the profitability and earnings performance to provide a complete picture of the financial results. Despite the decline in revenue, our profitability remained robust, demonstrating the resilience of our business model. EBITDA came in at EUR 28.2 million, down 21% year-over-year. EBITDA margin increased from 11.5% to 13.8%. This reflects the strong execution, especially in our E-mobility segment. Key drivers of this solid performance include a high-quality and well-diversified order backlog, strict cost discipline across all projects, capacity adjustments aligned with the subdued market environment, and an above-expectation Q4 with some larger E-mobility orders completed ahead of plan. Based on these dynamics, we raised our initial EBITDA margin guidance of 8% to 10% in January to 14%. With the final margin at 13.8%, we outperformed last year by 2.3 percentage points, underlining the operational strength of our segments. With profitability well established, let's now turn to order intake. As already mentioned, the overall investment climate remains challenging. Our business relies on our customers' CapEx, and especially for large-scale projects, long-term forward-looking decisions are essential. Many industries, particularly automotive, are currently not making these kinds of commitments, which affect our markets. However, we are not standing still. Internally, we continue to optimize costs and adjust capacities. Externally, we are actively developing new sales opportunities and pursuing M&A leads. We see clear opportunities to grow, and we are confident these initiatives will deliver value. In 2025, total order intake declined 26% year-over-year to EUR 147.5 million. The Next Automation segment is showing strong progress. Order intake increased 54% year-over-year to EUR 56.5 million. Our sales pipeline is also growing, demonstrating the potential of the Next Automation initiatives to drive future revenue. As a result, total order backlog declined from EUR 184 million at year-end 2024 to EUR 122.2 million at year-end 2025. However, the Next Automation segment continues to gain momentum with its order backlog increasing 39% to EUR 47.9 million. While the overall backlog is below our desired level, both volume and quality of the backlog are solid. And we have, of course, continued to account for this backlog conservatively in our financial statements. Let me now move to the next slide and walk you through the segment figures, starting with the E-mobility segment. In the E-mobility segment, order intake of EUR 91 million is 44% and under the previous year due to the mentioned market conditions. As a result, order backlog decreased by 50% to EUR 74.3 million. At the same time, revenue decreased by 37% to EUR 163.8 million. EBITDA is declining at a slower rate than revenue by minus 21% to EUR 26.6 million, which means a strong margin of 16.2%. In the Next Automation segment, order intake increased year-over-year to EUR 56.5 million as the new positioning is opening new markets. End of 2025, order backlog amounted EUR 47.9 million. Revenue decreased 25% year-over-year to EUR 40.2 million. And the EBITDA margin increased by 2 percentage points to 12.8%, which leads to a total EBITDA of EUR 5.1 million. Before we take a closer look at the balance sheet, let me provide a brief overview of our group cash flow in 2025. Cash flow from operating activities reached EUR 38.4 million, reflecting the strong results for the year and the EUR 50 million reduction in working capital compared to 2024. Importantly, we returned EUR 23.3 million to our shareholders through dividends and the share buyback program, underlining our commitment to delivering value to investors. As a result, cash and cash equivalents, including securities, remain at a record high level of EUR 152.8 million. By the end of December 2025, our balance sheet continues to be in a good shape with an equity ratio of 66.7% and EUR 153 million cash, of which EUR 148 million are net cash. Our financial foundation will continue to allow us to respond flexibly to market opportunities, to drive the expansion of the Next Automation segment, both organically and through M&A activities, and to ensure further shareholder participation through share buybacks and dividends. Following the successful year 2025, we will propose a dividend payment of EUR 0.25 at the AGM, which is a further modest dividend increase compared to the previous years. And of course, we currently have an existing authorization to acquire treasury shares up to 10% of share capital. This provides the company with flexibility to act opportunistically in the market, and at the same time, it ensures that we can continue to participate our shareholders in the company's success. To conclude, we would like to provide our guidance for 2026. We expect a mixed, but well balanced development across our segments. E-mobility revenue is likely to decline due to a lower starting order backlog. In Next Automation, we see continued positive momentum. Overall, the group enters 2026 with an order backlog of EUR 122.2 million. We expect total revenue of around EUR 160 million with an EBITDA margin of 6% to 8%. Our diversified business model provides stability and supports a resilient and profitable year. Let me now hand over to Sebastian again. Sebastian Roll: Yes. Thanks, Jan. So let me briefly summarize. 2025 was a challenging year for Aumann. Revenue dropped to EUR 204 million as investments across the European automotive sector remained weak. So despite these headwinds, we delivered a strong operating performance. We reduced capacity, further increased the flexibility of our cost structure and achieved additional cost savings in project execution. As a result, we reached EUR 28 million EBITDA, achieving an EBITDA margin of 13.8%, a strong indication of improved efficiency and profitability despite lower volumes. Thanks to these, we proposed a dividend of EUR 0.25 per share, continuing to provide an attractive return to our shareholders. Looking ahead to 2026, we are facing a decline in revenues again. Nevertheless, we are targeting a profitable EBITDA margin of 6% to 8%. So also in 2026, as Jan mentioned, our financial position is strong with high liquidity. That clearly sets us apart from most of our competitors and gives us the freedom to shape 2026. Last year, Next Automation developed strongly. This confirms that our diversification is working. Our clear goal is to accelerate this growth, both organically and through M&A. So thank you very much for your attention. We are happy now to take your questions. Operator: [Operator Instructions] What will be recurring revenue after sales services next year and in year 2025? Jan-Henrik Pollitt: Yes. The recurring revenue from after sales and services is approximately 10%. What we see in investment reluctance phases like 2025 and maybe also in '26 that some customers have higher volumes of retrofits of production lines, and this could, as long as the general CapEx is low, give maybe an additional increase on the aftersales side. Operator: How do you view Aumann's competitive position in the European EV ecosystem? And to what extent our increasingly aggressive Chinese entrants reshaping pricing, technology and market share dynamics? Sebastian Roll: Maybe starting the question with the question of competition out of China. So I mean maybe in comparison to other sectors, so we are dealing with China competition, I would say, the last 10 years. So there's nothing new. I also would add that there are not any changes concerning the competition out of China. Our business model is to be the front runner for the first very important, let's say, 1 or 3 lines, especially start of production of new EV is very important, for example, like it was in the new class for BMW. And I mean, in this area, the customer still is buying, let's say, more or less confidence, and this is our business model. So for the fourth, fifth, sixth line, there might be competition out of China. But then normally in normal market conditions, we are already ahead in new projects. Operator: And could you please give us more details on M&A environment and activities in Americas, which can give us inorganic growth? Sebastian Roll: Yes. So M&A, as you know, is an important pillar of our strategy, that's for sure. That's not new. So as we said also in other calls before, so we switched a little bit the direction. So we are now looking especially for targets in the area of Next Automation. That's where we would like to expand our portfolio, and that's clear our target for 2026 to acquire a company in this area. Operator: And the next question is slightly similar. Could you please elaborate further on the target focus, the size, geography and technology? Sebastian Roll: Yes. So geographically, it is still, for sure, the United States. So that's something we would like to enter. Therefore, we need a hub which is close to our technology, maybe a little bit similar. Within the European area, we are more searching, as I said, for additional technology and for additional customer relationships within the Next Automation. So looking in, as we said before, aviation, defense or, for example, life science as well. Operator: And with our large M&A, your capital structure looks rather inefficient and the share price level low. Any further buybacks to be expected? Jan-Henrik Pollitt: So there is no current decision on further buybacks. But as we have shown in the presentation, we have authorization for another 10% buyback of our share capital and we will decide if necessary on that topic. Operator: What is the potential revenue that can be achieved with the current personnel and corporate structure? Jan-Henrik Pollitt: Yes. So we adjusted capacities during 2024 and 2025. We didn't adjust directly on the EUR 160 million revenue guidance, which we have for '26. We still have a bit more capacity in-house so that we can hope for the rebound in order intake and scale up fast again. So if we don't see a positive effect, then of course, we will also use 2026 to further adjust capacities. We will also have the one or other topic in '26 where we see a few adjustments necessary but not larger ones. And as soon as the market rebounds again, that we are able to do like EUR 160 million to maybe EUR 240 million, EUR 250 million revenues again. Operator: You already answered one of the next questions. Have you continued to reduce the number of employees year-to-date? Jan-Henrik Pollitt: Yes. As said, we had some smaller adjustments, not like bigger topics, but small adjustments here and there. So we continue to make some homework, but no big issues. Operator: And there are 2 questions left. Any new strategic industries, markets, or processes that Aumann is looking on? And can you say something about order intake in Q1 and the sales pipeline? Sebastian Roll: Yes. I think what we tried to show in the presentation in a little bit more detail to give to give some ideas in Next Automation. So Next Automation for us is important. For us, it was important, especially that we had this growing market or that we had really acquired one big project, but also some minor projects in the fourth quarter of 2025. So I think you have seen that I think in the middle of the year, we are roughly 20% higher in order intake in Next Automation. After the third quarter, it was roughly 35% higher. And now after the last quarter, overall, we are 55% higher. So that means that the sales pipeline, especially in Next Automation is rising. This takes a little bit of time step by step. But as I said, for us, really important was to have, for example, this big project within the infrastructure area, yes? So in our point of view, a really nice project in the infrastructure, but also in clean tech and also in aviation. So in all these areas, now we have the first projects. In infrastructure, we even have this big project. So this is important for us. And you have to have in mind that, unfortunately, this order intake in Next Automation takes more time than in E-mobility because, as I said, the industry is new. We have the customers that are new or the products are new. And this will take a little bit of time also in 2026. So we will not see the big recovery in the first quarter, but we will see step-by-step a very increasing Next Automation. Operator: Thank you very much. And with an eye on the time, we have the last questions. There are 3 questions in a row, and I will take them one by one. The first is, Aumann reports EUR 12.2 million in securities apparently in the form of bonds. What specific type of bonds are these? Jan-Henrik Pollitt: These are government bonds and corporate bonds, but each with good credit ratings. Operator: And can you provide any information regarding order intake in the first quarter of 2026 broken down by segment? Jan-Henrik Pollitt: Honestly speaking, not yet. Operator: We expect significant working capital effects in cash flow in 2026? Jan-Henrik Pollitt: Yes. We finished the last 2 or 3 years at relatively low working capital levels. So each year, we expected a little bit working capital increases, but managed to hold the working capital at that low level. For '26, from today's perspective, I would see some working capital increases maybe back to a level of 15% to 20% of revenue. Operator: And the last question, can Next Automation reach similar EBITDA margin levels at the currently higher ones of 16% E-mobility? Sebastian Roll: Yes, in general, of course. So we had this high EBITDA margins, especially in E-mobility in 2026 (sic) [ 2025 ]. As said, we finished a project better than expected, which boosted the EBITDA margin end of the year, especially in Q4. For 2026, both segments will be a little bit lower in margins due to the decline in revenue. But in general, we are trying to maintain a good and profitable margin level in both segments. And as we said in the other segments like -- or the other industries like aviation or life sciences, there are also good margins to reach and achieve. Operator: Thank you very much. Ladies and gentlemen, we have come to the end of today's earnings call. Thank you very much for your interest in the Aumann AG. A big thank you also to you Sebastian and Jan-Henrik for your presentation and your time. Should you have any further questions, ladies and gentlemen, you are always very welcome to place them to Investor Relations. I wish you all a successful day around the world, and handing back over to Sebastian for some final remarks. Sebastian Roll: Yes, I hope that we have shown that Aumann will stay strong also in 2026, in unfortunately another challenging year for our industry, but we are focusing on what we can control. So that means internally, we are continuously optimizing our cost structure, we are building our sales opportunities in Next Automation. And for sure, we have an eye on M&A activities. So thank you very much for your interest.
Operator: Welcome, ladies and gentlemen, to the earnings call of Friedrich Vorwerk Group SA regarding the full year figures of 2025. The company's CEO, Torben Kleinfeldt; and CFO, Tim Hameister, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, Torben, the stage is yours. Torben Kleinfeldt: Yes. Thank you very much, and also a warm welcome from my side. Welcome to the Friedrich Vorwerk Earnings Call 2025. I will, for everybody who is not in detail familiar with Friedrich Vorwerk, run you very quickly through the main topics of our company and then give you a short market update about the latest developments in our main markets. Then I will hand over to Tim for, of course, the financial figures, which are key to this meeting here. And then I will give you a business update about our current projects we are running at the moment, at least the large ones. So yes, Friedrich Vorwerk has been active since founding in 1962. So with more than 60 years of experience in the business of engineering and constructing energy infrastructure here in Germany, mainly. We can look back at numerous very successful projects in our highly attractive main market, which is natural gas transition, electricity transition, clean hydrogen transition, and of course, adjacent opportunities where we sum up our activities in district heating, CO2 treatment and transport and treatment of biomethane. Today, we are operating from 14 locations within the north, mainly in the north of Germany with more than 2,200 well-trained employees. And yes, due to the energy transition, which is still going on here in Germany, we can look back at a very strong order intake already also in 2025. So we were able to acquire projects in a total volume of almost EUR 1 billion in 2025, which is an increase of 27% compared to the figures of the year 2024. Yes, where do these order intake come from? Main customers here in our 3 markets are, of course, the large TSOs operating the energy transport grids, not only in Germany, but also in the middle of Europe. So it could be in terms of electricity transition companies called TenneT and Amprion in looking at the market in clean hydrogen transition and natural gas transition, we have customers like Open Grid Europe, Gasunie and others. But of course, you can also find petrochemical companies and cable manufacturers within our customers. Yes. So what's the latest market update. First, I want to focus on the development of -- since German government has agreed with the EU Commission to set up new power plants in Germany. These very flexible power plants are necessary to support the production of renewable energy, mainly driven by wind and solar farms. And at times, you don't have wind and solar available. You need to have an energy source, which can be ramped up very quickly. So Germany is planning to install roughly 10 gigawatts of capacity in terms of gas-driven power plants. And that, of course, is an opportunity also for Friedrich Vorwerk Group, both in pipeline construction to run new natural gas pipelines and later on also hydrogen pipelines towards these gas-fired power stations. But also, we have a division in our plant construction department, which can supply the necessary fuel gas systems to supply those turbines delivered by companies like Siemens, GE or others. Other latest developments since we have all heard that the hydrogen economy has been struggling a bit over the last month. German Parliament has passed a so-called Hydrogen Acceleration Act. Main part of that is, of course, to install the so-called core grid for hydrogen transport in Germany, which could be the nucleus to develop the hydrogen industry in Germany because it will cut off costs for transport of hydrogen when the core grid is available and consumers and also producers of hydrogen can be easily connected to this grid. But also they want to secure and make investments in hydrogen production here locally in Germany easier and more reliable for the investors. And of course, all our other businesses like natural gas transition is also still ongoing since new LNG terminals are still developed on the coast of Germany. So the Bundesnetzagentur has just published the first draft of the new grid development plan, combining the investments in natural gas grid development and hydrogen grid development. And this plan looks out to the year 2035 with still investments in the natural gas grid of roughly EUR 3 billion. And they also found out that probably developing the core grid for hydrogen will be more costly than predicted 2 years ago. So the revised plan for setting up the hydrogen core grid roughly sketches out investments of EUR 25 billion instead of EUR 20 billion, which was estimated before. So also here, in the market of natural gas and hydrogen, huge potential for our company's group. And therefore, I would like to hand over to Tim for last year's financial figures. Tim Hameister: Thanks a lot, Torben. And also a warm welcome, everyone, from my side to today's earnings call. Overall, 2025 was a fantastic year for Friedrich Vorwerk. We achieved record-breaking results across all KPIs, successfully completed 2 acquisitions, secured numerous new major projects. And last but not least, we launched our proprietary welding robot in collaboration with our subsidiary, 5C Tech. Therefore, I'm very pleased to now present these strong results in detail. In terms of revenue, we've steadily increased over the course of the financial year and delivered a fantastic final quarter, which despite the seasonal nature of the business, nearly matched the strong performance of Q3. Overall, we benefited from favorable weather conditions in fiscal year 2025, not only in Q4, but especially in the first quarter when we were able to resume work after a short winter break on many projects as early as mid-January. This point, I would also like to briefly note that the first quarter does not always benefit from good weather conditions. This year, for example, in 2026, we've seen a harsher winter again after a long time with plenty of ice and snow, particularly in Northern Germany, resulting in a question of production stoppages even in February. However, depending on weather conditions in the next quarters that are more relevant in terms of revenue and earnings, we expect to be able to offset at least parts of this effect over the course of the year. For the full year 2025, we generated revenue of EUR 704 million, representing a remarkable 41% increase over the previous year. This was primarily due to our continued success in recruiting new employees, which led to a 15% increase in the average number of employees as well as an increase in productive hours per employee, higher equipment utilization and, of course, some pricing effects. The electricity segment's share of revenue has contributed -- has continued to rise, now standing at 52%, making it the primary driver of growth in 2025. While this is largely attributable to A-Nord, we are simultaneously working on several medium-sized projects in this segment, such as BorWin6, the Baltrum HDD project and several converter stations as well. 2/3 of the current order backlog is attributable to this segment. So continued growth is expected here. At the same time, we anticipate a significant growth momentum from the Clean Hydrogen segment as larger subprojects on the hydrogen core grid are also expected to be put out to tender in the foreseeable future. Furthermore, we expect additional growth in the adjacent opportunity segments in 2027 and the following years due to the German government special fund. The development of profitability was particularly impressive in the fourth quarter with an EBITDA margin of almost 29% and EBIT margin of almost 25%, even taking into account the dilutive effect of the cost plus fee contract in our major A-Nord project. In addition to the favorable weather conditions already mentioned in Q4, our success in claim negotiations, which typically take place in the fourth quarter was a key factor in the exceptionally high margin, along with higher earnings from joint ventures, which increased by nearly EUR 10 million compared to the same quarter of previous year. Accordingly, we also concluded the 2025 financial year as a whole, thanks to our high-quality order backlog and a flawless project execution were successful. We increased the EBITDA margin by 7 percentage points from 16.2% to 23.2% and more than doubled EBIT from EUR 59 million to EUR 137 million. Despite the tremendous 40% growth, we still managed to further reduce trade working capital, which along with the higher profitability, played a significant role in improving the net cash position. As a result, we were able to increase net cash by more than EUR 100 million compared to previous year, bringing it to EUR 262 million at year's end. It should be noted, however, that the trade working capital is always at its lowest level at the end of the year and rises as the construction season progresses. These swings between summer and winter can amount up to EUR 80 million or even EUR 90 million. With regards to capital allocation, our top priority remains investing in organic growth, specifically in the purchase of new pipe layers, drilling rigs, cranes and excavators and of course, our welding robots. We've budgeted approximately EUR 50 million for this in 2026. Furthermore, we will certainly be open to pursuing a larger M&A deal again provided we find the right target and of course, at a reasonable price. And finally, we would like to share the company's success with shareholders in form of a significantly higher dividend payout, consisting of EUR 0.70 base dividend and a EUR 0.40 special dividend. Let's now take a look at the development of order intake. In addition to the conventional order intake figure, we've already introduced a new KPI last year, the total project volume acquired. This new KPI also includes a proportionate project volume from the joint ventures in which Vorwerk is involved. And therefore, in our opinion, provides a more transparent view of the actual order situation regardless of the structure of the contract. The total project volume acquired rose by 29% to EUR 991 million in 2025, while conventional order intake at EUR 538 million is around 20% below previous year. The main reasons for this are, on the one hand, a shift in the order structure towards more joint ventures, especially in H1 2025. And on the other hand, our already well-filled order book, combined with a limited capacity of our resources. The order backlog, which corresponds to the conventional order intake figure declined, therefore, slightly to EUR 1 billion for the reasons stated before. We've learned from several investors that the communication regarding order intake and the contract structure is not yet clear enough. Therefore, we are currently working on reporting an order backlog KPI that includes our share of joint venture projects as well, starting with the Q1 report. And I expect that this additional metric will provide a transparent picture for all shareholders by then at the latest. Yes, and then based on our consistently high-quality order backlog, we expect our growth trajectory to continue in 2026 with revenues in the range of EUR 730 million to EUR 780 million. It should be noted that following 2 years of very high employee growth, we intend to slow down the expansion of our workforce somewhat in 2026 to give the organization and the administrative functions the opportunity to grow at the same pace while simultaneously focusing our recruiting efforts on attracting senior construction and project managers. At the same time, revenue growth is somewhat slower in 2026 due to the higher proportion of joint ventures. And this change in the project mix also means that we are now forecasting absolute EBITDA instead of EBITDA margin, specifically in the range of EUR 160 million to EUR 180 million for 2026 as this number is unaffected by the order structure. This guidance also takes into account the slightly softer Q1 2026 due to the adverse weather conditions. With that, I'd like to hand back to Torben for the business update. Torben Kleinfeldt: Yes, Tim, thank you very much. And of course, we did pick for this meeting our most outstanding projects at the moment. Please remember that during the year, we are operating on more than 500 smaller, midsized and also large projects. So we can, in this meeting, only give you a glance of the most outstanding projects. And I would like to start with the natural gas business here. It's a project we've already been working on last year. It's the so-called EWA pipeline, which is a 48-inch pipeline running from the caverns of Etzel towards compressor station of Wardenburg. This pipeline will continue in size of 40-inch towards the station of Drohne, which is more to the Rhine-Ruhr area, so in the south of the area. We have already finished the construction on EWA last year with a pressure test and the handover to the customer. So there's already gas on this pipeline. And the WAD pipeline is construction progress at the moment. We have already started in January with the first wells on site using our new welding robot, PX2 developed by our subsidiary, 5C Tech. We have completed roughly 400 wells on the project this year. And again, with very, very low mistakes in the wells. So it's -- the repair rate is definitely under 2%, which is very good in terms of fully automatic welding. Yes, changing actually over to the next natural gas pipeline project, which is, at the moment, our still largest project executed in a joint venture between the Habau Group and the Friedrich Vorwerk Group, compromises of 2 pipelines. First, the ETL 182 with a diameter of 56-inch and the ETL 179.200, which is a 36-inch pipeline. Altogether, a mid-3-digit million euro project and both pipelines are being executed by the same joint venture combination. As you can see in the picture below, we have already started some civil works to erect the pipe yards that has been done already in 2025, and we have already received most of the project pipes, which are purchased by our customer Gasunie. And we've actually started in the latest weeks to make preparations for the first loading procedures, so for the tunnel crossings and for the horizontal directional drilling, operations are already in place and will be executed in due course of this year. And then maybe next slide, we are not only active in pipeline cable laying, but our plant division construction is also very busy with a new project at a gas metering station called Groß Koris. This is the main metering and supply station for the company, ONTRAS. Here, we have a project to renew the full installation at Groß Koris with a volume of mid-2 million-digit range. And we have to deliver the full scope of engineering and also construction activities and will then commission the new plant as is foreseen at the moment in 2028. And the system will already be constructed in a hydrogen-ready way. So later on, once the usage of natural gas in the system is over, it can be easily converted to use for clean hydrogen and meter and also regulate the hydrogen being transferred in the grid. Next project is also a hydrogen project, which we have already been working for 1.5 years. This is the so-called HH-WIN project. So the city of Hamburg is trying to set up a hydrogen grid in the Port of Hamburg. Key figures here is an electrolyzer plant, which is located at the former power -- electrical power station of Moorburg, where about 100 megawatts equality of hydrogen is being produced and then fed into the Habau Grid, so the HH-WIN grid. And Friedrich Vorwerk has already executed 3 lots of this newly established hydrogen grid. And we have been recently awarded with 2 new lots to set up this hydrogen grid. The first lot involves actually a micro tunnel of almost 200 meters where we later on install the piping DN 300 for the transfer of hydrogen. And the following lot compromises of roughly 1,500 meters of new build hydrogen pipeline. But besides those existing projects where we've already started execution, we are, of course, still busy in our estimation department working on new estimates for new projects. Just to give you a small idea what could be coming up over the next years. In terms of pure natural gas transition, we are at the moment, working on estimation for the so-called Spessart-Odenwald-Leitung, which is also DN 1000 pipeline, about 115 kilometers long for Terranets and also other projects coming up from Open Grid Europe, setting up the core grid for hydrogen here in Germany. And also for Gasunie, new projects like ETL 187, which is directly in conjunction with the current project ETL 182, is at the moment in tendering phase and execution and commissioning would then be in '27, '28. But also still very attractive is the electrical market, where we are now facing the so-called second wave of large-scale electricity highways, projects like NordOstLink Section 2, SuedOstLink and SuedOstLink+ are being tendered out over probably end of this year and beginning of next year. And these projects will be commissioned in the mid-2034s -- in the mid-2030s. So also here, a huge potential also after 2030 for our company's group. And under adjacent opportunities, we were able to already win lot of the Rheinwater transport pipeline. This is a very large diameter pipeline, 2.2 meters in diameter that will later on transfer water from the river Rhine to flood the coal mines of RWE. And at the moment, we are working on the next lot to establish this water transfer pipeline. And also a very new business to our company, the transport of CO2 is ongoing. So the first tender we have received is the CO2 link from Lagerdorf, where Holcim is operating a cement factory towards the port of Brunsbuttel is on the table at the moment. Commissioning is foreseen for 2029 and tendering phase ongoing and probably construction phase will be '28 to '29. So this, of course, can only be done if we can establish to grow our headcount and our number of employees where we were very successful last year. So today, we can look at a workforce of more than 2,200 employees. Of course, the labor market within Germany, especially due to the low capacity in building construction, we were able to employ a lot of new blue-collar workers we could integrate in our projects. And probably during this year, we will definitely have a focus on growing our engineering staff and our overhead staff on the construction site. So challenge will be also to look for well-educated project managers and construction managers to manage all the blue-collar employees we were able to attract over the last month. Yes, that's it from our side. We are happy to receive your questions either by phone or by chatbot, and happy to answer them. Operator: [Operator Instructions] And the first hand is up from Lasse Stueben. Lasse Stueben: I wanted to ask just on the Q1. Is there any more color you can give roughly in terms of what we should expect in a year-on-year comparison just to avoid any sort of nasty surprises. The second question would be, what should we expect for headcount growth broadly in '26? And then the third question is, you mentioned sort of slowing down headcount growth, but then you also said that you would be willing to do a larger M&A or potentially do a larger M&A transaction. So how do we kind of square those 2 kind of comments? Because I guess a larger M&A deal would also involve many new employees. So just any color there would be great. Tim Hameister: Well, we've seen compared to the year before, some weeks of weather-related production stoppages in February, combined with the growth of the headcount could be possible to see a rather flat Q1 in 2026 in terms of revenue growth. And as I said, which could potentially partly be offset by stronger quarters in Q2 and Q3 as the overall share of Q1 on the full year revenue isn't that relevant. Regarding the headcount growth, when we talk about slowing down recruiting efforts, this is only in terms of organic growth, meaning directly hiring people, not including any M&A. From organic growth side, we expect to grow headcount by 5% to 8% in 2026 and any M&A would be add-on, on that. And of course, usually, we also acquire project managers and the respective engineering and administrative functions when doing a larger M&A deal. Operator: And additionally and slightly regarding question in the chat. Friedrich Vorwerk is guiding for a slightly lower margin in 2026 compared to a strong 2025, midpoint of 2026 guidance at 22.5% versus 23.1% in 2025 despite continued revenue growth. Could you provide a margin bridge for 2026 versus 2025 and outline the key driving factors? Tim Hameister: Well, we've always communicated that we see the margin potential in the mid- to long term at our company between 20% and 22%. However, in particularly strong years as in 2025, it's also possible to achieve an even better margin, more than 23% due to basically a flawless project execution, good weather conditions and so on. But on the long run, we feel pretty confident with 21%, 22%. Operator: And the follow-up from the person. Could you please provide more details on the Nord-A project, specifically regarding the recent delays and their potential impact on bonus malus payments. Additionally, is there any bonus or malus effect already factored into the 2026 guidance? Tim Hameister: Yes. As we already communicated last year, A-Nord project is expected to be slightly delayed with completion now anticipated in summer 2027 instead of end of 2026 due to missing permits. We are still in discussions regarding adjustments to the bonus-related milestones. And these discussions have been ongoing for some time. We do not yet have a definite outcome on these discussions, but we remain still confident and hope to sign their respective contract amendment in the course of the second quarter 2026. And based on this information, at least a portion of the contract liability we've already included into the books since and accrued over the project duration. Part of that could be reversed once this amendment is signed in the second quarter. However, we did not factor in any positive impacts from that amendment as it is not signed yet. Operator: And for now, we have no further questions. Ladies and gentlemen, I will hold the room for another moment in case someone might be typing right now. And there is a hand up from Lasse Stueben, again. Lasse Stueben: Great. Just a follow-up on sort of -- you mentioned kind of the JV share of projects is obviously going up. Should we expect that kind of level of the JV income you saw in '25 to be roughly the same in 2026? Or how should we think about that? Tim Hameister: All the new JVs we entered into last year, we expect to -- that the net earnings of the JVs will even increase compared to 2025. Operator: And another hand up from Leon Muhlenbruch. Leon Muhlenbruch: I have a quick question regarding to the current geopolitical situation. With the energy crisis already on the way and inflation likely to rise similarly to 2022, which had a significant impact on Friedrich Vorwerk, how are you prepared for such a scenario? Torben Kleinfeldt: Well, first of all, we were able to have a better negotiation position in most of the contracts that are in the order backlog at the moment. So most of the contracts have included price escalation clauses. So we can -- on the most bigger projects, we can forward the price escalations to our customers, although, of course, not to 100% because they are mainly bound to indexes which are more general, for example, the steel index or the crude oil index, which is not always 100% equivalent to the products we are actually using in our projects. But in the end, we can at least -- we are at least in a way better position this year than in 2022. Also in 2022, most impact was from a plant construction project where we had to bring a lot of material to the project. If we look at the current large-scale projects we are operating on, it's mainly the pipeline projects where the bare pipe is supplied by our customers. So we are mainly supplying equipment and personnel, so services, which are, at the moment, not that much affected as back in 2022. Operator: Another hand up from [ Lueder Schumacher ]. Unknown Analyst: I've got a few questions on margins. One is, are there any kind of older projects which have lower margins in them that which are running out and should be supportive to the group margin outlook once they do? And what about the margins implied in the order intake? Can we assume that they should be at a premium to the margins you've seen in 2025? Or should it more be in the region of the long-term potential of 20% to 22% you've been hinting at? Tim Hameister: Well, there are currently no such legacy projects in the current order backlog, although we still have the dilutive effect from our major project A-Nord, which will run until summer 2027, where the base margin is definitely lower than the group average. Apart from that, there are no legacy projects with low margins. And well, I mean, we have already seen such strong margins in 2025. We do not expect that we can further increase this margin profile. And therefore, rather to suggest that you can assume the long-term potential at around 21%, 22% for the next years. Unknown Analyst: In your order intake you had in 2025, we should already assume this? Or is this still at the margins you've seen in '25? Tim Hameister: Well, the margin profile calculated in those projects is roughly on the same level as we've seen the year before. However, on the one hand side is the calculated margin. On the other hand side, is the actual project execution on the fields. And this has also a major impact on the earnings in the end. Operator: And we're moving on to 2 questions in our chat. Are you planning any buybacks? What are the key impacts for the Iran war for you? And what are you doing to hedge against it? For example, natural gas inflation, diesel? Tim Hameister: At the moment, there are no plans for any share buybacks. We've decided to instead increase the dividend and to also pay out the special dividend of EUR 0.40 per share. Adding on the answer from Torben regarding Iran, the major impact for us at the moment is, of course, the higher cost for fuel, especially diesel. To give you some color on that, the total cost of diesel last year was around EUR 12 million. So it's not the largest position in our P&L statement. And we've, of course, already hedged some of the amounts needed already before the war in Iran. So there will be, of course, some effect, but not a significant one. Torben Kleinfeldt: But on the other hand, the crisis also has a positive impact on the market because at the moment, customers are really pushing the projects and trying to get more LNG receiving capacity in Germany, which then, of course, also means constructing new pipelines and constructing new plants, which is then also good on the market side for us. Operator: Can you discuss your appetite to revisit medium- to long-term guidance? And what milestones would trigger an upgrade? Tim Hameister: Well, that's definitely a thing to consider this year as we are pretty well on track on the older mid- to long-term outlook. So maybe we can expect to see a new outlook in the second half of this year. Operator: Ladies and gentlemen, we still have a minute for your questions left. And if there should be no further ones, you can always get in contact with Investor Relations. And this is it. With no further questions, we come to the end of today's earnings call. Thank you very much for your interest in Friedrich Vorwerk Group SE. A big thank you also to you, Torben and Tim, for your presentation and your time. I wish you a successful day around the world and giving the last words to Torben again. Torben Kleinfeldt: Yes. Thank you very much for listening. I think especially this year, we can look at some very, very interesting projects we can execute for our customers. And please stay with us and hear the latest news from our projects in the future. Have a good time around the world. Bye-bye. Tim Hameister: Bye.
Operator: Good morning, and welcome to MiNK Therapeutics Fourth Quarter and Year-End 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this event is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the conference over to Stefanie Perna-Nacar, Chief Communications Officer. Please go ahead. Stefanie Perna-Nacar: Thank you, operator, and thank you all for joining us today. Today's call is being webcast and will be available on our website for replay. I'd like to remind you that this call will include forward-looking statements, including notes related to our clinical development, regulatory and commercial plans, time lines for data releases and partnership opportunities. These statements are subject to risks and uncertainties. Please refer to our SEC filings available on our website for a detailed description of these risks. Joining me today are Dr. Jennifer Buell, President and Chief Executive Officer; Dr. Terese Hammond, Head of Development; and Melissa Orilall, Principal Financial and Accounting Officer. I'd like to turn the call over to Dr. Buell to highlight our progress from this quarter. Dr. Buell. Jennifer Buell: Thank you, Stefanie. Good morning, everyone. For those new to MiNK Therapeutics, we are advancing a clinically validated allogeneic invariant natural killer T cell platform, one that is fundamentally differentiated in its ability to restore and coordinate immune function across diseases or even an immune failure. And unlike conventional cell therapies, our MiNK iNKT cells are off the shelf. They are administered without lymphodepletion, without HLA matching. And we've demonstrated clinical activity with a very favorable safety profile. MiNK cells are now in Phase II clinical trials in patients with solid tumor cancers and autoimmune inflammatory conditions like GvHD and severe lung disease. Clinically, in cancer, MiNK cells have demonstrated durable survival beyond 23 months with complete remission extending beyond 2 years in heavily pretreated refractory cancers. Cancer is expected with an expected survival of about 6 months. Outside of cancer, we're also seeing clinical activity in patients with hypoxemic pneumonia or otherwise called severe acute respiratory distress, reinforcing the broader applicability of our immune restoration cell product. We're excited to discuss with you today our upcoming trials. We have secured external funding to advance MiNK cells into graft-versus-host disease with the trial in the activation phase at University of Wisconsin. We have also externally funded a trial in Phase II in patients with gastric cancer with results presented last year at AACR and expected to be presented at a major conference in the first half of this year. And finally, our soon-to-be enrolling MiNK-sponsored randomized Phase II trial in patients with severe hypoxemic pneumonia or ARDS, a condition that affects approximately 200,000 to 300,000 patients per year. We'll talk more about that in just a few moments. Most importantly, we're doing this with a level of capital efficiency that's really uncommon in cell therapy. We're combining disciplined internal execution with non-dilutive funding through government and institutional partnerships, and we're manufacturing at a scale that appears to be the most efficient in cell therapy at this time. At the same time, we continue to build scientific validation through multiple data presentations and peer-review publications, many of which will be out in the first half of this year. Now history tells an important story here on execution. And looking back at 2025. It was a year that we moved really from promise to proof, establishing durability, validating our mechanism, demonstrating that this platform can be advanced with both rigor and efficiency. In 2022, we demonstrated that our results were really quite durable clinically and biologically. And at the Society for Immunotherapy of Cancer Annual Meeting in late 2025, just a couple of months ago, we presented updated clinical data in heavily pretreated checkpoint refractory solid tumor cancers. This is a substantial and growing population of patients. These were patients who had exhausted standard options. What we observed was meaningful. Median overall survival exceeding 23 months in combination with commercially available PD-1 therapies, complete remissions extending beyond 2 years, long-term survival across multiple solid tumor cancers, including gastric, thymoma, renal, adenoid cystic cancers and lung cancer. These outcomes matter, particularly in this patient population and importantly, because they have persisted over time. At the same time, we've deepened our understanding of how this is working. We saw activation and expansion of important immune cell populations, dendritic cell supporting antigen presentation, repolarization of macrophages towards pro-inflammatory antitumor states and reinvigorated or exhausted T cells with restored function. We also observed controlled increases in cytokines, such as interferon gamma, IL-2, TNF alpha, consistent with a productive immune response without systemic toxicity. The takeaway for us is very straightforward. The durability we're seeing clinically is supported by a coordinated immune activation state. This is not a single pathway effect, and it's what defines MiNK iNKT cells as our platform. In scientific validation beyond oncology, we asked how this biology goes beyond cancer. This year at the Keystone Symposia, Dr. Terese Hammond, our Head of Pulmonary Critical Care Medicine, presented human data showing significant depletion of iNKT cells in patients with end-stage idiopathic pulmonary fibrosis. This is important evidence of immune deficiency in patients with immune dysfunction. And when you see that forward, the path becomes really clear. Restore what's missing. This is how we're approaching expansion, follow the biology, validate in humans and then move into clinical execution. And we've taken this approach in patients with hypoxemic pneumonia or ARDS. This is a very serious condition. It's growing in prevalence and incidents and is affecting currently approximately 200,000 to 300,000 patients annually with a mortality rate of 30% to 40%, and no approved disease-modifying therapies. In our Phase I/II trial in this particular population, we dosed critically ill patients with respiratory distress. These patients were on mechanical ventilation and/or VV-ECMO. These patients are consuming substantial resources in our ICUs, and our results showed that we can get the cells into patients in community hospitals. We can dose to 1 billion cells without deleterious tox. As a matter of fact, the cells were tolerated quite well. We not only did not see cytokine release. We, in fact, dampened pro-inflammatory signals or harmful inflammation. We observed prolonged survival. 70% of patients alive compared to 10% of patients within hospital controls. We observed that these cells could locally modulate immune function in the lung, and they can restore function of lung tissue, specifically endothelial function and improved oxygenation in these patients. We saw rapid activation. We saw patients coming off of the most severe life support, VV-ECMO. We saw that these cells also not only cleared infectious pathogens, but also we saw a reduction in the onset of secondary infections. This is important because secondary infections are often the cause of death for patients in the ICU. As a result of these findings, we are now well on our way to announcing the first dosing of patients in our randomized Phase II study that's designed to expand to a Phase II/III study. This is a global program. It's designed very efficiently, and it's planned to launch with our colleagues at top centers in Ukraine and in the U.S. These are real-world environments that we are able to reach because of the practicality of our approach. We have an off-the-shelf therapy with a favorable safety profile and no requirement for complex infrastructure. We're working very closely with the Ministry of Health in Ukraine and the U.S. FDA to advance this program. With dosing starting imminently, we expect an initial clinical data in the second half of this year. These are very rapid trials. This will be our first randomized controlled study in pulmonary diseases designed for clinically meaningful and regulatory aligned end points. We believe this will enable MiNK to pursue rapid development pathways. Now in other disease settings, we've spoken to you about our graft-versus-host disease program already. We've shared more detailed foundation of this program and the study design, in fact, and our intent is to help patients undergoing hematopoietic stem cell transplantation, where more than half of the patients have graft failure and GvHD. We plan to not only improve engraftment success but prevent acute GvHD. The study is important. It's garnered the support of 2 distinct sources of nondilutive funding. The NIH NIAID STTR Award supports the development of preclinical and translational work while the Mary Gooze Clinical Trial Award directly funds the clinical trial execution at the University of Wisconsin, including patient enrollment and trial operations. The clinical trial is in final review with the university with clinical initiation targeted for the first half of this year. We believe we'll be dosing very soon. This structure allows us to advance into immune-mediated diseases in immune-tolerant settings without incremental capital burden. It's disciplined expansion. It's funded, targeted and aligned with our platform. Nondilutive funding is part of how we operate. In 2025, we secured multiple sources of nondilutive capital funding, including NIH funding, philanthropic support and consortium funding through C-Further most recently, which includes approximately over $1 million to get into our IND-enabling studies and meaningful double-digit downstream economics. The C-Further collaboration is particularly important, not just for the nondilutive funding to support IND-enabling development of a really important target, a PRAME-targeting iNKT TCR, but for what it represents strategically. This program was selected as one of the first within the C-Further consortium, an international pediatric oncology initiatives supported by Cancer Research Horizons, LifeArc and Great Ormond Street Hospital, reflecting external validation of both the maturity of our platform and its potential in high-need setting such as pediatric cancer. The collaboration advances our PRAME-targeted TCR-engineered iNKT program combining a well-characterized tumor antigen with our iNKT platform, which is designed to bridge innate and adaptive immunity and coordinate broader immune responses within the tumor microenvironment. And importantly, the program is structured to generate rigorous comparative preclinical data across multiple pediatric tumor models to support data-driven candidate selection and advance to first-in-human studies. From a strategic standpoint, the model allows us to advance the next-gen program in a high-need indication with nondilutive capital. It also allows us to leverage leading academic and translational experts without building that infrastructure or expanding it internally. MiNK gets to retain meaningful double-digit downstream commercial participation, and we preserve the platform flexibility through a nonexclusive structure. This is simply not a funding mechanism. It's really a way to expand the platform, derisk early innovation and create long-term value while maintaining capital discipline. So taken together, these sources of capital have enabled us to advance clinical programs and expand the pipeline and generate translational data while preserving shareholder equity. It's deliberate, and it's a repeatable part of how we're building MiNK. And on the financial discipline front, we're doing more with less. We strengthened our financial position over the year with our cash increasing to about $13.4 million from $4.6 million and our operating cost decreasing nearly 40% over the course of the year. The key takeaway is that we've increased cash while reducing burn and continuing to execute on important programs. With the scale and complexity of the work we're now undertaking, including randomized clinical trial execution, multi-program advancement and increasing external engagement, we've strengthened our financial leadership. We recently appointed Melissa Orilall as Principal Financial Officer. Melissa brings deep experience in financial operations planning and disciplined execution, including her work at the Whitehead Institute and in corporate banking. Her focus is on ensuring that our capital allocation, reporting and operational execution is tightly aligned as we advance through this next phase. Now on our expanded pipeline. As I've mentioned, we continue to advance our PRAME TCR NKT program by non-dilutive funding. Further, our MiNK-215, which is our CAR iNKT program targeting stromal resistance is very important. We've continued to build our translational data set on this asset as we responsibly bring it into IND enablement. These currently do not have a specific near-term catalyst, but we would expect to be announcing some within the next 3 to 5 months on our 215 program. And as our data set has strengthened, we have seen increased external interest in 797 and iNKT biology. Some of you have actually reached out to me specifically about third parties who have announced the combination of 797 in their clinical trials. And as I've mentioned now publicly, MiNK has not formally announced any of our strategic collaborations yet. We -- strategic partnering does remain core to our strategy, and we plan to continue to keep you apprised as these developments ensue. What to watch for in 2026? This year, we are focused on some substantial and measurable milestones which are really quite exciting. In the first half of 2026, as I mentioned, we expect to initiate our randomized Phase II, Phase II/III ARDS hypoxemic pneumonia study and the activation and dosing in our GvHD trial. In the second half of the year, we do expect to have initial clinical data from both of those programs, not only representing our first randomized data set in pulmonary diseases, but also early immune and translational readouts in GvHD as well as in lung disorders. In parallel, during the first half of '26, we'll continue to build scientific validation through multiple data presentations and peer-reviewed publications, extending the data sets presented at SITC and Keystone. And taken together, these milestones are designed to generate clear interpretable data that informs our next steps, both in development and in potential regulatory and strategic pathways. Now I'd like to turn the call over to Melissa to review our financials. Melissa? Melissa Orilall: Thank you, Jen. During 2025, we executed an at-the-market facility in a disciplined manner, ending the year with a cash balance of $13.4 million. Since year-end, we have raised an additional $3 million through this program, extending our runway through 2026 and supporting key clinical milestones. Our net loss for the fourth quarter of 2025 was $2.6 million or $0.56 per share compared to $2.5 million or $0.62 per share for the fourth quarter of 2024. For the full year, net loss was $12.5 million or $2.93 per share compared to $10.8 million or $2.86 per share in 2024. These results reflect continued focused investment in advance in our agenT-797 clinical programs while maintaining disciplined control over our operational spend. I will now turn the call back to Jen for closing remarks. Jennifer Buell: Thank you so much, Melissa. Thank you all for being here. I think just in closing, I'll just reiterate that for us, if you just step back, the story is pretty simple. In 2025, we demonstrated durability. We showed mechanistic validation of our technology as well as human disease relevance. Those data have now set the stage for what we're doing going forward. And in 2026, we're executing on an important randomized controlled clinical trial as well as signal detection and clinical advancement in very important disease settings, including GvHD. We'll be generating clinical data and publicizing that very quickly and advancing towards potential paths for regulatory approval. We have multiple readouts planned in the first half of this year with data from our upcoming trials and preliminary readouts in the second half of this year. We're excited and I look forward to your questions. I'll now turn the call back over to the operator. Operator: [Operator Instructions] Our first question comes from the line of Emily Bodner with H.C. Wainwright. Emily Bodnar: A couple for me. Maybe starting with the Phase II pneumonia and ARDS study. Could you kind of talk through how many patients approximately that trial is going to be? And what the appropriate control arm is here? And then you also talked about development in IPF, which sounds like it would need to be a separate trial. So maybe just talk about how you're thinking of these different indications. Jennifer Buell: Emily, thanks so much for your question. Absolutely. While we have not publicly posted the program in hypoxemic pneumonia, what I'm going to share with you is that currently in the disease population that we're pursuing, there are no approved therapies. Patients are treated with standard of care. This is the same state that we were in when we conducted our Phase I/II trial establishing the dose of these cells in this population of patients. What we've demonstrated is that patients are predominantly treated with steroid therapy with, of course, anti-infectives, antifungals, et cetera, but really physicians' choice in this disease setting. So we have 2 things that are really important. One, we've already observed and presented that these cells appear to be quite active in restoring immune functionality and clearing pathogens, independent of steroids being on board, which is unique. Many times, there's a concern about immunosuppression with steroid use, standard of care steroid use, and we're not observing that. So these cells appear to be sort of steroid-resistant. Their ability to modulate immune function, clear pathogens in the presence. We will be looking at physicians' choice as effectively standard of care. The cells will be added on top of standard of care versus the cells alone. And a critical piece of this is Dr. Terese Hammond is leading up our pulmonary disease programs. She's also clinically still seeing patients in the ICU. Terese is boarded in pulmonary critical care, neurocritical care medicine and has been treating patients with this disease profile for now decades of her life. For us to be able to have such a thoughtful leader on this program and such an informed clinician, it gives us a real opportunity to position these cells and to bring them forward into the patients who we believe they will be most effective in. And taking the cells plus or minus standard of care, gives us not only the differentiation of the cells, the added potential of the cells, but also maybe paradigm changing for these patients in the ICU. Emily Bodnar: Great. And maybe -- sorry, can I just ask one more. On the second-line gastric cancer trial, could you just remind us the status of that and when we may be able to see efficacy data from that study? Jennifer Buell: You will be seeing some efficacy data in the first half of this year at a major conference, which we'll be announcing relatively soon. And we're excited about that. But I did not answer your question about IPF, and this is, of course, a very important pulmonary fibrosis, end stage in particular, is another disease setting. It's effectively in immune-related condition. We've demonstrated that with our human data, and it's a substantial opportunity for us to develop the cells in IPF. We have some important preclinical observations as well as some new human data demonstrating that this is a pathway where we believe the cells can bring benefit. You're going to be hearing more about the design of that trial and the development path as we advance over the next couple of months. We will very likely host a special meeting in this disease setting. We have selected a scientific advisory boards, have informed clinicians in this space and have developed a program to advance. We'll be very responsible, though, about how we're going to be funding that program. So you'll hear more about that relatively soon. Operator: Our next question comes from the line of Mayank Mamtani with B. Riley Securities. Mayank Mamtani: I appreciate the comprehensive update. Just on the last point on IPF and even GvHD, what target patient population, Jen, you have in consideration? And wonder what differentiating aspects to some of the recently approved anti-fibrotic, anti-inflammatory approaches you aspire to have the cell therapy you positioned against. And then I have to ask some of the IL-15 iNKT cell combination trial launching on ct.gov. Could you help us understand how and what this 30 subject kind of total exposure would inform what you are looking to independently do with. It looks like the randomized controlled trial in the ARDS setting. I was not sure if the populations that you're exploring are overlapping across those combination and randomized trial settings. So if you could clarify that, that would be great. Jennifer Buell: Mayank, thank you for your questions. I just -- I want to make sure that I have them correct because you did cut out for just a moment. But I think on the randomized ARDS trial, the patient populations will be identified as hypoxemic pneumonia. There's a very specific global ARDS definition system that allows us to be very specific and selective about this patient population. So they will be selected and identified based on their oxygenation, so a very quantifiable way of interrogating this as well as important organ function states. So we will put a detailed eligibility criteria in clinical trials. And this is another program where we are going to be announcing very soon upon the announcement of the launch of the randomized Phase II as well as the dosing in GvHD. We'll be hosting a very special R&D meeting that will allow you to talk with our experts, our clinical development experts as well as review a deep dive of the programs and the eligibility of these patients. So in ARDS, there have been some -- there are currently no approved therapy. So this becomes standard of care, becomes really a physician's choice in this disease setting. There are no functional cell therapies in this setting. What we've been able to observe in our early stage development is that our cells really persist, and that they are not vulnerable to steroids. And that allows the cells to continue to modulate immunity in this setting. We observed that. We see we can administer the cells, 1 billion cells tolerably. We observed that the cells are in the peripheral system for some time, a number of days before they then home very specifically to lung tissue. We've been able to use a special technique that allows us, particularly in ventilated patients to take samples from the -- within the lung tissues called the bronchial lavage. This is the assessment that we can test in order to interrogate the immune cell, the local immune modulating capability of the cells. It gives us 2 opportunities. In addition to just radiologically looking at what's happening clinically for within a patient's lungs, we can start to see clearance of pathology, clearance of some inflammatory markers on, you could see this radiologically. But then also when we really dig into lung tissue, we're able to see what is actually happening. In these patients, we see the substantial pro-inflammatory signatures. And what we've publicly disclosed, and we'll be publishing even more this year in the first half will be some of the anti-inflammatory signals that we see here in this population of patients. So we're really dampening pro-inflammatory signals. We're eliminating fungal infections. We're eliminating some gram-negative bacteria, which is a major problem. And this becomes an even more substantial problem in some austere regions like war zones or places where we will be studying these cells where multidrug-resistant organisms are a substantial problem. Given that we've already been able to demonstrate, not only with our clinical trial that we published on, but also through emergency use that we've continued to help patients with, we've demonstrated that we can really do an impactful clinical activity and modulate some of these multidrug-resistant organisms, clearing them from patients with some of the most severe critical illnesses. This is such an important part of the work that we're doing right now. So you'll hear more about the eligibility of these patients, and I'm going to invite you specifically to talk with some of the experts in this disease setting. So I think that was a longer way of answering the simple question on standard of care and what will be adequate controls, which would be really just physician's choice in this population. Mayank Mamtani: I appreciate it. And I don't know if I missed that, or my question was cut out. If you could address the combination approach with the IL-15 agonist that trial, that launched on clinicaltrials.gov, what the rationale was? And how is that different than the study that you just referenced? Jennifer Buell: Mayank, thank you. Thank you very much. The study that I've referenced is the MiNK-sponsored randomized Phase II trial that we have not yet posted on clinicaltrials. We will be doing so. It's currently in review. The study that you're referring to, and I'm grateful that you brought it up. I've received a host of inbound inquiries about this from investors as well as from regulators. And I want to be very clear that MiNK has not formally announced any collaboration or any clinical trials with the IL-15 superagonist. And I think that's an important thing to understand. We will -- if we are to advance with these types of strategic collaborations, we will be very public about doing so. So at this time, strategic collaborations are really important to MiNK, and we have a number of discussions that are actively underway, not only for clinical trial combinations. There's a lot of excitement about 797, but also for broader strategic collaborations as well as minority financial investments in the company, none of which have we publicly disclosed at this time. We will do so when the -- during the appropriate time. Operator: At this time, we have no further questions. I will now turn the call back over to Dr. Jennifer Buell for closing remarks. Jennifer Buell: Thank you, operator, and thank you all so much for your participation today. Operator: Ladies and gentlemen, that concludes today's conference call. You may now disconnect your lines. Have a pleasant day.
Operator: Welcome, ladies and gentlemen, to the earnings call of Friedrich Vorwerk Group SA regarding the full year figures of 2025. The company's CEO, Torben Kleinfeldt; and CFO, Tim Hameister, will guide you through the presentation and the figures shortly, followed by a Q&A session via audio line and chat box. Having said this, Torben, the stage is yours. Torben Kleinfeldt: Yes. Thank you very much, and also a warm welcome from my side. Welcome to the Friedrich Vorwerk Earnings Call 2025. I will, for everybody who is not in detail familiar with Friedrich Vorwerk, run you very quickly through the main topics of our company and then give you a short market update about the latest developments in our main markets. Then I will hand over to Tim for, of course, the financial figures, which are key to this meeting here. And then I will give you a business update about our current projects we are running at the moment, at least the large ones. So yes, Friedrich Vorwerk has been active since founding in 1962. So with more than 60 years of experience in the business of engineering and constructing energy infrastructure here in Germany, mainly. We can look back at numerous very successful projects in our highly attractive main market, which is natural gas transition, electricity transition, clean hydrogen transition, and of course, adjacent opportunities where we sum up our activities in district heating, CO2 treatment and transport and treatment of biomethane. Today, we are operating from 14 locations within the north, mainly in the north of Germany with more than 2,200 well-trained employees. And yes, due to the energy transition, which is still going on here in Germany, we can look back at a very strong order intake already also in 2025. So we were able to acquire projects in a total volume of almost EUR 1 billion in 2025, which is an increase of 27% compared to the figures of the year 2024. Yes, where do these order intake come from? Main customers here in our 3 markets are, of course, the large TSOs operating the energy transport grids, not only in Germany, but also in the middle of Europe. So it could be in terms of electricity transition companies called TenneT and Amprion in looking at the market in clean hydrogen transition and natural gas transition, we have customers like Open Grid Europe, Gasunie and others. But of course, you can also find petrochemical companies and cable manufacturers within our customers. Yes. So what's the latest market update. First, I want to focus on the development of -- since German government has agreed with the EU Commission to set up new power plants in Germany. These very flexible power plants are necessary to support the production of renewable energy, mainly driven by wind and solar farms. And at times, you don't have wind and solar available. You need to have an energy source, which can be ramped up very quickly. So Germany is planning to install roughly 10 gigawatts of capacity in terms of gas-driven power plants. And that, of course, is an opportunity also for Friedrich Vorwerk Group, both in pipeline construction to run new natural gas pipelines and later on also hydrogen pipelines towards these gas-fired power stations. But also, we have a division in our plant construction department, which can supply the necessary fuel gas systems to supply those turbines delivered by companies like Siemens, GE or others. Other latest developments since we have all heard that the hydrogen economy has been struggling a bit over the last month. German Parliament has passed a so-called Hydrogen Acceleration Act. Main part of that is, of course, to install the so-called core grid for hydrogen transport in Germany, which could be the nucleus to develop the hydrogen industry in Germany because it will cut off costs for transport of hydrogen when the core grid is available and consumers and also producers of hydrogen can be easily connected to this grid. But also they want to secure and make investments in hydrogen production here locally in Germany easier and more reliable for the investors. And of course, all our other businesses like natural gas transition is also still ongoing since new LNG terminals are still developed on the coast of Germany. So the Bundesnetzagentur has just published the first draft of the new grid development plan, combining the investments in natural gas grid development and hydrogen grid development. And this plan looks out to the year 2035 with still investments in the natural gas grid of roughly EUR 3 billion. And they also found out that probably developing the core grid for hydrogen will be more costly than predicted 2 years ago. So the revised plan for setting up the hydrogen core grid roughly sketches out investments of EUR 25 billion instead of EUR 20 billion, which was estimated before. So also here, in the market of natural gas and hydrogen, huge potential for our company's group. And therefore, I would like to hand over to Tim for last year's financial figures. Tim Hameister: Thanks a lot, Torben. And also a warm welcome, everyone, from my side to today's earnings call. Overall, 2025 was a fantastic year for Friedrich Vorwerk. We achieved record-breaking results across all KPIs, successfully completed 2 acquisitions, secured numerous new major projects. And last but not least, we launched our proprietary welding robot in collaboration with our subsidiary, 5C Tech. Therefore, I'm very pleased to now present these strong results in detail. In terms of revenue, we've steadily increased over the course of the financial year and delivered a fantastic final quarter, which despite the seasonal nature of the business, nearly matched the strong performance of Q3. Overall, we benefited from favorable weather conditions in fiscal year 2025, not only in Q4, but especially in the first quarter when we were able to resume work after a short winter break on many projects as early as mid-January. This point, I would also like to briefly note that the first quarter does not always benefit from good weather conditions. This year, for example, in 2026, we've seen a harsher winter again after a long time with plenty of ice and snow, particularly in Northern Germany, resulting in a question of production stoppages even in February. However, depending on weather conditions in the next quarters that are more relevant in terms of revenue and earnings, we expect to be able to offset at least parts of this effect over the course of the year. For the full year 2025, we generated revenue of EUR 704 million, representing a remarkable 41% increase over the previous year. This was primarily due to our continued success in recruiting new employees, which led to a 15% increase in the average number of employees as well as an increase in productive hours per employee, higher equipment utilization and, of course, some pricing effects. The electricity segment's share of revenue has contributed -- has continued to rise, now standing at 52%, making it the primary driver of growth in 2025. While this is largely attributable to A-Nord, we are simultaneously working on several medium-sized projects in this segment, such as BorWin6, the Baltrum HDD project and several converter stations as well. 2/3 of the current order backlog is attributable to this segment. So continued growth is expected here. At the same time, we anticipate a significant growth momentum from the Clean Hydrogen segment as larger subprojects on the hydrogen core grid are also expected to be put out to tender in the foreseeable future. Furthermore, we expect additional growth in the adjacent opportunity segments in 2027 and the following years due to the German government special fund. The development of profitability was particularly impressive in the fourth quarter with an EBITDA margin of almost 29% and EBIT margin of almost 25%, even taking into account the dilutive effect of the cost plus fee contract in our major A-Nord project. In addition to the favorable weather conditions already mentioned in Q4, our success in claim negotiations, which typically take place in the fourth quarter was a key factor in the exceptionally high margin, along with higher earnings from joint ventures, which increased by nearly EUR 10 million compared to the same quarter of previous year. Accordingly, we also concluded the 2025 financial year as a whole, thanks to our high-quality order backlog and a flawless project execution were successful. We increased the EBITDA margin by 7 percentage points from 16.2% to 23.2% and more than doubled EBIT from EUR 59 million to EUR 137 million. Despite the tremendous 40% growth, we still managed to further reduce trade working capital, which along with the higher profitability, played a significant role in improving the net cash position. As a result, we were able to increase net cash by more than EUR 100 million compared to previous year, bringing it to EUR 262 million at year's end. It should be noted, however, that the trade working capital is always at its lowest level at the end of the year and rises as the construction season progresses. These swings between summer and winter can amount up to EUR 80 million or even EUR 90 million. With regards to capital allocation, our top priority remains investing in organic growth, specifically in the purchase of new pipe layers, drilling rigs, cranes and excavators and of course, our welding robots. We've budgeted approximately EUR 50 million for this in 2026. Furthermore, we will certainly be open to pursuing a larger M&A deal again provided we find the right target and of course, at a reasonable price. And finally, we would like to share the company's success with shareholders in form of a significantly higher dividend payout, consisting of EUR 0.70 base dividend and a EUR 0.40 special dividend. Let's now take a look at the development of order intake. In addition to the conventional order intake figure, we've already introduced a new KPI last year, the total project volume acquired. This new KPI also includes a proportionate project volume from the joint ventures in which Vorwerk is involved. And therefore, in our opinion, provides a more transparent view of the actual order situation regardless of the structure of the contract. The total project volume acquired rose by 29% to EUR 991 million in 2025, while conventional order intake at EUR 538 million is around 20% below previous year. The main reasons for this are, on the one hand, a shift in the order structure towards more joint ventures, especially in H1 2025. And on the other hand, our already well-filled order book, combined with a limited capacity of our resources. The order backlog, which corresponds to the conventional order intake figure declined, therefore, slightly to EUR 1 billion for the reasons stated before. We've learned from several investors that the communication regarding order intake and the contract structure is not yet clear enough. Therefore, we are currently working on reporting an order backlog KPI that includes our share of joint venture projects as well, starting with the Q1 report. And I expect that this additional metric will provide a transparent picture for all shareholders by then at the latest. Yes, and then based on our consistently high-quality order backlog, we expect our growth trajectory to continue in 2026 with revenues in the range of EUR 730 million to EUR 780 million. It should be noted that following 2 years of very high employee growth, we intend to slow down the expansion of our workforce somewhat in 2026 to give the organization and the administrative functions the opportunity to grow at the same pace while simultaneously focusing our recruiting efforts on attracting senior construction and project managers. At the same time, revenue growth is somewhat slower in 2026 due to the higher proportion of joint ventures. And this change in the project mix also means that we are now forecasting absolute EBITDA instead of EBITDA margin, specifically in the range of EUR 160 million to EUR 180 million for 2026 as this number is unaffected by the order structure. This guidance also takes into account the slightly softer Q1 2026 due to the adverse weather conditions. With that, I'd like to hand back to Torben for the business update. Torben Kleinfeldt: Yes, Tim, thank you very much. And of course, we did pick for this meeting our most outstanding projects at the moment. Please remember that during the year, we are operating on more than 500 smaller, midsized and also large projects. So we can, in this meeting, only give you a glance of the most outstanding projects. And I would like to start with the natural gas business here. It's a project we've already been working on last year. It's the so-called EWA pipeline, which is a 48-inch pipeline running from the caverns of Etzel towards compressor station of Wardenburg. This pipeline will continue in size of 40-inch towards the station of Drohne, which is more to the Rhine-Ruhr area, so in the south of the area. We have already finished the construction on EWA last year with a pressure test and the handover to the customer. So there's already gas on this pipeline. And the WAD pipeline is construction progress at the moment. We have already started in January with the first wells on site using our new welding robot, PX2 developed by our subsidiary, 5C Tech. We have completed roughly 400 wells on the project this year. And again, with very, very low mistakes in the wells. So it's -- the repair rate is definitely under 2%, which is very good in terms of fully automatic welding. Yes, changing actually over to the next natural gas pipeline project, which is, at the moment, our still largest project executed in a joint venture between the Habau Group and the Friedrich Vorwerk Group, compromises of 2 pipelines. First, the ETL 182 with a diameter of 56-inch and the ETL 179.200, which is a 36-inch pipeline. Altogether, a mid-3-digit million euro project and both pipelines are being executed by the same joint venture combination. As you can see in the picture below, we have already started some civil works to erect the pipe yards that has been done already in 2025, and we have already received most of the project pipes, which are purchased by our customer Gasunie. And we've actually started in the latest weeks to make preparations for the first loading procedures, so for the tunnel crossings and for the horizontal directional drilling, operations are already in place and will be executed in due course of this year. And then maybe next slide, we are not only active in pipeline cable laying, but our plant division construction is also very busy with a new project at a gas metering station called Groß Koris. This is the main metering and supply station for the company, ONTRAS. Here, we have a project to renew the full installation at Groß Koris with a volume of mid-2 million-digit range. And we have to deliver the full scope of engineering and also construction activities and will then commission the new plant as is foreseen at the moment in 2028. And the system will already be constructed in a hydrogen-ready way. So later on, once the usage of natural gas in the system is over, it can be easily converted to use for clean hydrogen and meter and also regulate the hydrogen being transferred in the grid. Next project is also a hydrogen project, which we have already been working for 1.5 years. This is the so-called HH-WIN project. So the city of Hamburg is trying to set up a hydrogen grid in the Port of Hamburg. Key figures here is an electrolyzer plant, which is located at the former power -- electrical power station of Moorburg, where about 100 megawatts equality of hydrogen is being produced and then fed into the Habau Grid, so the HH-WIN grid. And Friedrich Vorwerk has already executed 3 lots of this newly established hydrogen grid. And we have been recently awarded with 2 new lots to set up this hydrogen grid. The first lot involves actually a micro tunnel of almost 200 meters where we later on install the piping DN 300 for the transfer of hydrogen. And the following lot compromises of roughly 1,500 meters of new build hydrogen pipeline. But besides those existing projects where we've already started execution, we are, of course, still busy in our estimation department working on new estimates for new projects. Just to give you a small idea what could be coming up over the next years. In terms of pure natural gas transition, we are at the moment, working on estimation for the so-called Spessart-Odenwald-Leitung, which is also DN 1000 pipeline, about 115 kilometers long for Terranets and also other projects coming up from Open Grid Europe, setting up the core grid for hydrogen here in Germany. And also for Gasunie, new projects like ETL 187, which is directly in conjunction with the current project ETL 182, is at the moment in tendering phase and execution and commissioning would then be in '27, '28. But also still very attractive is the electrical market, where we are now facing the so-called second wave of large-scale electricity highways, projects like NordOstLink Section 2, SuedOstLink and SuedOstLink+ are being tendered out over probably end of this year and beginning of next year. And these projects will be commissioned in the mid-2034s -- in the mid-2030s. So also here, a huge potential also after 2030 for our company's group. And under adjacent opportunities, we were able to already win lot of the Rheinwater transport pipeline. This is a very large diameter pipeline, 2.2 meters in diameter that will later on transfer water from the river Rhine to flood the coal mines of RWE. And at the moment, we are working on the next lot to establish this water transfer pipeline. And also a very new business to our company, the transport of CO2 is ongoing. So the first tender we have received is the CO2 link from Lagerdorf, where Holcim is operating a cement factory towards the port of Brunsbuttel is on the table at the moment. Commissioning is foreseen for 2029 and tendering phase ongoing and probably construction phase will be '28 to '29. So this, of course, can only be done if we can establish to grow our headcount and our number of employees where we were very successful last year. So today, we can look at a workforce of more than 2,200 employees. Of course, the labor market within Germany, especially due to the low capacity in building construction, we were able to employ a lot of new blue-collar workers we could integrate in our projects. And probably during this year, we will definitely have a focus on growing our engineering staff and our overhead staff on the construction site. So challenge will be also to look for well-educated project managers and construction managers to manage all the blue-collar employees we were able to attract over the last month. Yes, that's it from our side. We are happy to receive your questions either by phone or by chatbot, and happy to answer them. Operator: [Operator Instructions] And the first hand is up from Lasse Stueben. Lasse Stueben: I wanted to ask just on the Q1. Is there any more color you can give roughly in terms of what we should expect in a year-on-year comparison just to avoid any sort of nasty surprises. The second question would be, what should we expect for headcount growth broadly in '26? And then the third question is, you mentioned sort of slowing down headcount growth, but then you also said that you would be willing to do a larger M&A or potentially do a larger M&A transaction. So how do we kind of square those 2 kind of comments? Because I guess a larger M&A deal would also involve many new employees. So just any color there would be great. Tim Hameister: Well, we've seen compared to the year before, some weeks of weather-related production stoppages in February, combined with the growth of the headcount could be possible to see a rather flat Q1 in 2026 in terms of revenue growth. And as I said, which could potentially partly be offset by stronger quarters in Q2 and Q3 as the overall share of Q1 on the full year revenue isn't that relevant. Regarding the headcount growth, when we talk about slowing down recruiting efforts, this is only in terms of organic growth, meaning directly hiring people, not including any M&A. From organic growth side, we expect to grow headcount by 5% to 8% in 2026 and any M&A would be add-on, on that. And of course, usually, we also acquire project managers and the respective engineering and administrative functions when doing a larger M&A deal. Operator: And additionally and slightly regarding question in the chat. Friedrich Vorwerk is guiding for a slightly lower margin in 2026 compared to a strong 2025, midpoint of 2026 guidance at 22.5% versus 23.1% in 2025 despite continued revenue growth. Could you provide a margin bridge for 2026 versus 2025 and outline the key driving factors? Tim Hameister: Well, we've always communicated that we see the margin potential in the mid- to long term at our company between 20% and 22%. However, in particularly strong years as in 2025, it's also possible to achieve an even better margin, more than 23% due to basically a flawless project execution, good weather conditions and so on. But on the long run, we feel pretty confident with 21%, 22%. Operator: And the follow-up from the person. Could you please provide more details on the Nord-A project, specifically regarding the recent delays and their potential impact on bonus malus payments. Additionally, is there any bonus or malus effect already factored into the 2026 guidance? Tim Hameister: Yes. As we already communicated last year, A-Nord project is expected to be slightly delayed with completion now anticipated in summer 2027 instead of end of 2026 due to missing permits. We are still in discussions regarding adjustments to the bonus-related milestones. And these discussions have been ongoing for some time. We do not yet have a definite outcome on these discussions, but we remain still confident and hope to sign their respective contract amendment in the course of the second quarter 2026. And based on this information, at least a portion of the contract liability we've already included into the books since and accrued over the project duration. Part of that could be reversed once this amendment is signed in the second quarter. However, we did not factor in any positive impacts from that amendment as it is not signed yet. Operator: And for now, we have no further questions. Ladies and gentlemen, I will hold the room for another moment in case someone might be typing right now. And there is a hand up from Lasse Stueben, again. Lasse Stueben: Great. Just a follow-up on sort of -- you mentioned kind of the JV share of projects is obviously going up. Should we expect that kind of level of the JV income you saw in '25 to be roughly the same in 2026? Or how should we think about that? Tim Hameister: All the new JVs we entered into last year, we expect to -- that the net earnings of the JVs will even increase compared to 2025. Operator: And another hand up from Leon Muhlenbruch. Leon Muhlenbruch: I have a quick question regarding to the current geopolitical situation. With the energy crisis already on the way and inflation likely to rise similarly to 2022, which had a significant impact on Friedrich Vorwerk, how are you prepared for such a scenario? Torben Kleinfeldt: Well, first of all, we were able to have a better negotiation position in most of the contracts that are in the order backlog at the moment. So most of the contracts have included price escalation clauses. So we can -- on the most bigger projects, we can forward the price escalations to our customers, although, of course, not to 100% because they are mainly bound to indexes which are more general, for example, the steel index or the crude oil index, which is not always 100% equivalent to the products we are actually using in our projects. But in the end, we can at least -- we are at least in a way better position this year than in 2022. Also in 2022, most impact was from a plant construction project where we had to bring a lot of material to the project. If we look at the current large-scale projects we are operating on, it's mainly the pipeline projects where the bare pipe is supplied by our customers. So we are mainly supplying equipment and personnel, so services, which are, at the moment, not that much affected as back in 2022. Operator: Another hand up from [ Lueder Schumacher ]. Unknown Analyst: I've got a few questions on margins. One is, are there any kind of older projects which have lower margins in them that which are running out and should be supportive to the group margin outlook once they do? And what about the margins implied in the order intake? Can we assume that they should be at a premium to the margins you've seen in 2025? Or should it more be in the region of the long-term potential of 20% to 22% you've been hinting at? Tim Hameister: Well, there are currently no such legacy projects in the current order backlog, although we still have the dilutive effect from our major project A-Nord, which will run until summer 2027, where the base margin is definitely lower than the group average. Apart from that, there are no legacy projects with low margins. And well, I mean, we have already seen such strong margins in 2025. We do not expect that we can further increase this margin profile. And therefore, rather to suggest that you can assume the long-term potential at around 21%, 22% for the next years. Unknown Analyst: In your order intake you had in 2025, we should already assume this? Or is this still at the margins you've seen in '25? Tim Hameister: Well, the margin profile calculated in those projects is roughly on the same level as we've seen the year before. However, on the one hand side is the calculated margin. On the other hand side, is the actual project execution on the fields. And this has also a major impact on the earnings in the end. Operator: And we're moving on to 2 questions in our chat. Are you planning any buybacks? What are the key impacts for the Iran war for you? And what are you doing to hedge against it? For example, natural gas inflation, diesel? Tim Hameister: At the moment, there are no plans for any share buybacks. We've decided to instead increase the dividend and to also pay out the special dividend of EUR 0.40 per share. Adding on the answer from Torben regarding Iran, the major impact for us at the moment is, of course, the higher cost for fuel, especially diesel. To give you some color on that, the total cost of diesel last year was around EUR 12 million. So it's not the largest position in our P&L statement. And we've, of course, already hedged some of the amounts needed already before the war in Iran. So there will be, of course, some effect, but not a significant one. Torben Kleinfeldt: But on the other hand, the crisis also has a positive impact on the market because at the moment, customers are really pushing the projects and trying to get more LNG receiving capacity in Germany, which then, of course, also means constructing new pipelines and constructing new plants, which is then also good on the market side for us. Operator: Can you discuss your appetite to revisit medium- to long-term guidance? And what milestones would trigger an upgrade? Tim Hameister: Well, that's definitely a thing to consider this year as we are pretty well on track on the older mid- to long-term outlook. So maybe we can expect to see a new outlook in the second half of this year. Operator: Ladies and gentlemen, we still have a minute for your questions left. And if there should be no further ones, you can always get in contact with Investor Relations. And this is it. With no further questions, we come to the end of today's earnings call. Thank you very much for your interest in Friedrich Vorwerk Group SE. A big thank you also to you, Torben and Tim, for your presentation and your time. I wish you a successful day around the world and giving the last words to Torben again. Torben Kleinfeldt: Yes. Thank you very much for listening. I think especially this year, we can look at some very, very interesting projects we can execute for our customers. And please stay with us and hear the latest news from our projects in the future. Have a good time around the world. Bye-bye. Tim Hameister: Bye.
Operator: Ladies and gentlemen, welcome to the SoftwareOne Full Year 2025 Results Conference Call and Live Webcast. I'm Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Kjell Arne Hansen, Head of Investor Relations at SoftwareOne. Please go ahead. Kjell Hansen: [Audio Gap] presentation. My name is Kjell Arne Hansen, and I'm the Head of Investor Relations at SoftwareOne. Joining me today are our Co-COOs, Raphael Erb and Melissa Mulholland; and our CFO, Hanspeter Schraner. In terms of agenda, Melissa and Raphael will start with a summary of the year and the Q4 performance. Hanspeter will then take us through our detailed financial performance. And finally, Melissa will take us through the final section covering our AI opportunities within the business model as well as our financial outlook for 2026. Before handing over, please let me draw your attention to the disclaimer regarding forward-looking statements and non-IFRS measures on Slide 2 and 3. And with that, I will hand it over to Melissa. Melissa Mulholland: Thank you, Kjell Arne. Welcome to our full year 2025 presentation. 2025 was transformational. With the combination of SoftwareOne and Crayon, we have created a global software and cloud leader with unmatched reach and capabilities. Today, combined gross sales amount to CHF 14 billion. We serve over 70,000 clients across more than 70 countries, supported by 13,000 highly skilled colleagues. Our ecosystem is equally strong with more than 10,000 vendors and a network of 12,000 channel partners, providing reach to the SMB segment. This scale matters. It shows how we are one of a kind and a truly global partner for hyperscalers and ISVs. In addition, both Gartner and IDC have recognized us as a leader in software asset management. We are well positioned to capture the structural growth opportunity and customer demand based on our global scale and market position. Overall, we have delivered. We returned to growth with revenue up 1.4% year-over-year on a like-for-like basis, ahead of our initial expectation of broadly flat development. Profitability remained strong with an adjusted EBITDA margin of 20.9%, in line with our commitment to stay above 20%. At the same time, we maintained discipline on adjustments coming in below our guidance on below CHF 30 million, excluding the Crayon-related costs. Lastly, we made good progress on synergies, delivering CHF 43 million of run rate by the end of 2025. As of today, total run rate cost synergies amount to CHF 64 million. This was a year where we delivered on our promises while building the foundation for further improvement. Growth improved steadily throughout 2025, and by Q3, we were back to positive territory. And in Q4, we reached 11% revenue growth. We will continue to build off the foundation laid in 2025. The actions we are taking are working, putting us in a stronger position to drive momentum in 2026. Let me briefly comment on the full year performance. I'll focus on the combined like-for-like numbers as this best reflects the underlying development of the business. As stated earlier, we delivered 1.4% revenue growth for the full year, with a clear acceleration into Q4 where growth reached 11%. At the same time, profitability improved and we delivered an adjusted EBITDA margin of 20.9% for the year, an improvement of 0.5 percentage points compared to 2024. The key message is clear. We are improving our growth momentum, combined with continued strong margins. Hanspeter will explain the detailed IFRS numbers shortly. But as you can see, our business is on a path of continued growth. Looking at our 3 segments, we see a clear pattern of improving momentum across the business. In direct, the full year performance was impacted by the Microsoft incentive changes. However, we saw a clear rebound in Q4, supported by multi-vendor and continued CSP growth. Going forward, we see significant growth opportunities driven by our broad partner ecosystem across global software vendors, including AWS, Google, VMware and Adobe. Furthermore, the push for EU sovereign cloud increases demand for multi-cloud compliant cloud solutions, playing directly to SoftwareOne's strength in navigating complex vendor ecosystems and regulatory requirements. In channel, growth was strong at 18.7% for the full year, driven in particular by APAC, which represents 60% of the total channel revenue. At the end of February 2026, we became the first global authorized distributor for Google Cloud, enabling channel partners to access and resell Google. This is a strategic milestone allowing us to significantly expand our channel business through authorized distribution of Google Cloud services across 10 markets, covering Australia, India, the Nordics, Germany, France and the U.S., with additional countries to follow throughout the year. In services, we see solid momentum, supported by demand in areas like cloud and cybersecurity. Across all business lines, growth reflects our ability to capture new incentive opportunities introduced by Microsoft across CSP and services. While EA-related incentives were reduced, we have partially offset this by leveraging our combined service portfolio and strong CSP offering. Profitability improved across all business lines, driven by stronger growth, impact from cost savings and synergy realization. We see a strong and encouraging development with solid growth in channel and services and a recovering direct business entering 2026. I will now hand it over to Raphael to walk you through the regional performance. Raphael Erb: Thank you very much, Melissa. Welcome to everyone from my side. I will now take you through the regional performance. First, I want to highlight the change in our segment reporting going forward. Following the acquisition of Crayon, our operating segments have been reassessed. Given our significant presence in the Nordics and the CEE, the rest of Europe region has been restructured into 3 new operating regions: Nordics, Western Europe and CEE. In DACH, revenue grew 2.8% in 2025, driven in particular by a strong Q4 growth of 15.4%. Headwinds from Microsoft incentive changes on enterprise agreements negatively impacted revenue during the year, but this was offset by a successful transition to CSP as well as strong multi-vendor and public sector growth. Revenue in Western Europe increased 3.3%, driven by strong growth in multi-vendor sales and services, while also here partly offset by changes in Microsoft incentives. Similar to the performance in DACH, the year ended strong with 12.2% revenue growth in Q4. APAC grew 11.4%, driven by strong results across the region, with India performing particularly well. The largest contributor to growth came from services business as was driving by strong demand with data and AI and cloud services. I'm also pleased to share that during Q1 2026, payments commenced from a public sector customer in the Philippines on Crayon's previously outstanding receivables with USD 22 million collected as of today. The remaining amount is expected to be collected shortly, bringing this long-standing matter to a close. Nordics revenue grew 0.7% in 2025. During the year, growth in the direct business was positive and accelerated to double digit in the fourth quarter as the impact from Microsoft incentives ease. 2025 was a disappointing year in North America with revenue declining 12.6% year-over-year. The 2025 performance reflects the previous GTM-related sales execution challenges as well as impact from Microsoft incentive changes. The previously initiated turnaround measures are gaining traction, with internal sales metrics improving sequentially, supporting a recovery and return to growth in 2026. LATAM declined 4.4%, driven in particular by weakness in the direct business. We see strong growth opportunity across key markets like Brazil, Mexico and Colombia, and are confident in our capability to achieve profitable growth in the region. As part of the portfolio review and to support improved future performance, the company has decided to exit 4 nonstrategic countries in the region: Argentina, Uruguay, El Salvador and Nicaragua. Finally, CEE grew revenue with 14% in 2025 driven by strong double-digit growth across both the direct business and services business. Now I want to present a good example of our Google Cloud capabilities and how we support customers in a cloud migration and modernization project. Barton Peveril, a U.K.-based college with more than 5,000 students partnered with us to migrate to Google Cloud. They were facing a significant increase in on-premise hosting costs, alongside the need to modernize their IT environment and support new AI-driven learning tools. Together with SoftwareOne, they executed the full cloud migration over a relatively short period, followed by a managed service agreement to support ongoing operations. The outcome was solid, where they achieved meaningful cost savings, reduced operational workload and significantly improved the performance and security of their systems. Importantly, this also led to a 5-year managed service agreement where we support and maintain their cloud infrastructure going forward. This is a great example on how we combine cloud migrations with long-term services, creating both immediate customer value and recurring revenue streams for us. With that, I will now hand over to Hanspeter to walk you through the 2025 IFRS financial update. Hanspeter Schraner: Thank you, Raphael, and a warm welcome to everybody joining us today. In this section, we are presenting the IFRS figures in reported currency. As a reminder, the income statement includes 12 months of SoftwareOne and 6 months of Crayon. Year-over-year revenue growth of 22.5% mainly reflects the acquisition of Crayon closed on 2nd of July 2025. Reported EBITDA margin improved -- improvement is driven by benefits of the previously initiated cost reduction program and continuous cost control. The increase in depreciation, amortization and impairments from CHF 72.7 million to CHF 123.7 million is related to the acquisition and includes depreciation on fixed assets, amortization of intangible assets [Audio Gap] of right of use assets and CHF 17.8 million of impairments. The impairments comprise CHF 3.8 million on intangible assets, CHF 8 million on LATAM goodwill and CHF 6 million on right-of-use assets related to office closures due to integration. Net financial expense increased to CHF 54.4 million, significantly higher than prior year. This was mainly due to lower finance income and higher finance expenses. The decrease of finance income is largely reflecting a CHF 12 million lower fair value gain on Crayon shares in 2025 compared to prior year. Finance expenses increased driven by higher interest costs from acquisition financing and higher factoring costs in line with the increased use of factoring. In addition, other finance expense includes a one-off CHF 5 million make-whole payment related to the early redemption of Crayon bonds following the acquisition. Income tax expense is CHF 28.1 million, implying an effective tax rate of 95% compared with the expected average group tax rate of 23%. The main drivers of this gap are nondeductible expenses for tax purposes as well as unrecognized tax losses. Net profit for the period is CHF 1.4 million. In this slide, I will take you to the adjusted to reported EBITDA. Our reported EBITDA ended at CHF 207.6 million in 2025. 2025 adjustments to reported EBITDA of CHF 69.4 million in total were primarily related to Crayon transaction and integration costs totaling CHF 48.3 million. Excluding these costs, adjustments to reported EBITDA were CHF 21.1 million, well below the CHF 30 million target. Overall, we saw a significant reduction in adjustments with 2025 adjustments constituting around 30% of reported EBITDA in comparison to around 90% in previous year. The adjusted EBITDA margin in Q4 2025 was 23.4%, down 1.5 percentage points year-on-year, mainly due to significantly lower EBITDA adjustments compared with Q4 2024. Let me now walk you through the developments in adjusted OpEx on a like-for-like basis. This bridge shows the development on a combined like-for-like basis which we believe is the most relevant way to assess the cost development. Overall, OpEx remained broadly stable year-on-year, declining slightly to CHF 1.2 billion, reflecting strong cost discipline despite inflationary pressure and continued investments in the business. In '25, realized CHF 74 million of cost savings from the legacy SoftwareOne cost-saving program, which was completed in Q2 2025 as well as 16 million of in-year synergies corresponding to CHF 43 million of run rate synergies. Synergies from the Crayon acquisition are primarily driven by the elimination of publications, simplification of the organizational structure and efficiency gains across corporate functions. These effects helped offset underlying cost increases during the year. Compensation increased by CHF 42 million mainly due to salary inflation across the existing global workforce and the catch-up of social security contribution in India following legislative changes. In addition, we continue to invest selectively in sales and delivery capabilities to support future growth. Importantly, these investments are funded by realized synergies, allowing us to strengthen go-to-market and delivery capacity without diluting margins over time. We also saw higher third-party delivery costs in line with increased activity levels as well as some nonrecurring and other costs, and foreign exchange had a positive impact of approximately CHF 4.6 million. Overall, this reflects a balanced cost development with tangible synergy delivery, disciplined cost management and continued investment to support sustainable growth. Turning to the balance sheet. The most significant year-on-year changes reflect the impact of the Crayon acquisition, which is clearly visible across several line items. Cash and cash equivalents increased to CHF 419.1 million, while financial liabilities rose to CHF 788.4 million, mainly reflecting the CHF 575 million term loan, CHF 100 million utilization of the revolving credit facility at year-end and the CHF 100 million bridge loan, which was repaid in January 2026. As a result, net debt amounted to CHF 369.3 million compared to a net cash position in the prior year. Net working capital on 31st December 2025 was negative at CHF 564.4 million, primarily driven by the inclusion of Crayon and the continued use of factoring. The increase in intangible assets is mainly driven by the recognition of acquired technology and customer relationships from the Crayon acquisition as well as an increase in goodwill which primarily reflects the value of the assembled workforce and the expected synergies from combining the operations of Crayon. Equity increased to CHF 981.4 million driven by the acquisition of Crayon. Overall, this balance sheet reflects the step up in scale following the acquisition. Before I walk through the trade receivables 2025, I would like to briefly comment on a matter we decided to disclose proactively in today's press release. Preliminary legal proceedings have been initiated into potential forgery of documents by individuals relating to SoftwareOne's recording of certain overdue trade receivables in the first half of 2024. The proceedings are not directed against SoftwareOne, and they were triggered by allegations raised by a third party. I want to make it very clear. Internal audits performed an extensive retrospective assessment of trade receivables and related provisions of the first half of 2024 and concluded that they were accurately recorded. The assessment also confirmed that provisions were appropriate and consistent with subsequent write-offs and provisions. The slide presents the aging of trade receivables and the corresponding lifetime expected credit loss for 2025 and 2024. The acquisition of Crayon led to a material increase in trade receivables in '25. In accordance with IFRS, acquired trade receivables are recognized at fair value net of expected credit losses. The implied bad debt amounts to CHF 33 million included in the respective fair value and is largely allocated to receivable past due by more than 181 days. For like-for-like comparability, and on a cross presentation of the acquired trade receivables, the expected credit loss in the bigger than 180 days bucket would be approximately 50%, broadly comparable to the previous year. As of December 2025, Crayon's acquired trade receivables included USD 37 million related to a public customer in the Philippines. As Raphael already mentioned, USD 21.5 million of this amount was collected in March 2026. At year-end 2025 and next to the standard closing procedures, internal audit again performed an additional assessment of the trade receivables and related provision recognized at year-end 2025 and again concluded that they were accurately recorded. Further, the statutory audit of the 2025 full year accounts, which included a focused review of revenue recognition and the provisioning of overdue trade receivables provided further independent assurance regarding the appropriateness of the provisions recognized in the 2025 accounts and their compliance with applicable standards. Turning to the net working capital. Net working capital after factoring decreased by CHF 411.6 million year-on-year, mainly reflecting increased use of short-term factoring of approximately CHF 282 million as well as the positive impact from acquiring the negative working capital from Crayon. Given our business model, characterized by high gross sales volume and seasonal volatility, effective working capital management is key. As part of this, we use nonrecourse factoring as a flexible and economically attractive liquidity management tool applied in a disciplined manner. However, it's important to state that our primary focus remains on structurally improving underlying working capital over time. Net working capital before factoring decreased by CHF 129.5 million year-on-year, driven largely by the acquisition and consolidation of Crayon. Crayon entered the group with a strong negative working capital position which contributed positively to the balance sheet and reduced net working capital at the combined company level. On the right-hand side, we outlined key operational levers we are addressing across the end-to-end order-to-cash cycle, including faster and more accurate invoicing, reduction of overdue receivables, strong credit entry billing processes and better alignment of payment terms with vendors and customers. Together, these measures support our ambition to structurally strengthen working capital and, in turn, improve cash flow over time. Now turning to our cash flow statement. Working capital changes gave a cash inflow of CHF 130.6 million. However, as mentioned on the previous slide, this is significantly impacted by the use of factoring. Noncash items of CHF 169.6 million mainly reflect depreciation, amortization and impairments, together with the add back of the net finance results. CapEx came in at CHF 65.5 million, primarily driven by investments in internal IT, systems and platforms. The cash outflow related to the Crayon acquisition amounted to CHF 290.2 million, as presented in the cash flow statement, and shown net of cash acquired. Gross cash consideration totaled to CHF 504.8 million comprising CHF 419.4 million for the acquisition of Crayon shares and CHF 85.4 million for the subsequent squeeze out. This was partially offset by cash acquired of CHF 270.3 million. The remaining CHF 2.7 million relates to earn-out considerations to be paid in cash for Medalsoft and Predica acquisitions back in 2024 and 2022, respectively. Financing contributed a net inflow of CHF 273.4 million, driving by debt funding, partially offset by 2024 dividends of CHF 45.6 million and interest costs. We ended the period with a cash of CHF 419.1 million, giving us a solid liquidity position. Turning to the net debt development. The increase over the year was primarily driven by the cash outflow related to the acquisition of Crayon. The Crayon acquisition reflects net cash outflow of CHF 405 million as well as the impact of the derecognition of the Crayon shares. Excluding the acquisition effect, the underlying cash generation was driven by a positive contribution of CHF 277 million from adjusted EBITDA and the further CHF 130.6 million inflow from changes in working capital. Other cash outflows mainly relate to cash-effective portion of EBITDA adjustments, capital expenditures, interest and tax payments as well as dividends. As a result, net debt stood at CHF 369.3 million at year-end. Leverage measured on as net debt divided by adjusted EBITDA on an IFRS basis remains at a comfortable level of 1.3x. On a like-for-like basis, leverage would amount to 1.2x. Finally, let me turn to the dividend. Our dividend policy targets a payout ratio of 30% to 50% of adjusted net profit for the year. As a reminder, at our H2 '25 earnings release, we refined our policy by excluding transaction and integration costs related to the Crayon acquisition when calculating adjusted net profit used for dividends. This was made to better reflect the underlying earning power and dividend capacity of the business in a year of integration. For 2025, we proposed a dividend of CHF 0.15 per share, corresponding to a total distribution of CHF 33 million and the payout ratio of 37% of reported adjusted net profit. Excluding Crayon-related transaction and integration costs, the implied payout ratio is 71%. This dividend proposal reflects our continued commitment to delivering attractive shareholder returns while maintaining a balanced capital allocation. It also underlines our confidence that the actions implemented to strengthen net working capital and improve operational execution will translate into improved cash generation in 2026. With that, I will hand it back to Melissa, who will provide further insights in how our business model benefits from AI, followed by her closing remarks. Melissa Mulholland: Thank you, Hanspeter. Before I go into our outlook and closing remarks, I would like to address how we are positioned in a market that is now rapidly and fundamentally being changed by AI. AI is increasing software and cloud consumption, but also complexity, driving a much greater need for governance, optimization and services. At the same time, AI adoption is forcing customers to upgrade their software estates and invest in new tools while accelerating cloud migration and usage. This plays directly into our model. We thrive in helping our customers in maximizing return on investment in IT and simplifying complexity. We support customers across the full life cycle from sourcing and procurement to migration and cloud services to optimization and cost management and increasingly into data and AI solutions. And as customers become more AI ready, we see a clear increase in demand for higher-value services. From a hyperscaler perspective, the vendors see us as a clear driver of AI solutions. Given our customer proximity, AI capabilities that have been established since 2017 and our agility to market, we are uniquely positioned to help customers manage the complexity and spend through our AI solutions. AI is not just a technology shift. It is a structural growth driver for our business. Let me finally turn to our outlook for 2026. We expect revenue growth to accelerate to mid-single digits on constant currency on a like-for-like basis. We see growth driven by CSP, multi-vendor expansion, increasing demand for higher value services and continued channel growth. Expanding our AI capabilities alongside the sales force enables us to build and deliver AI-driven customer solutions, further accelerating consumption growth. At the same time, we expect further margin improvement with adjusted EBITDA margin above 23%, driven by operating leverage, synergies and continued cost discipline. On synergies, we remain on track to reach CHF 100 million run rate synergies, building on the strong progress already delivered in 2025. As already mentioned, by the end of March, the total realized cost synergies amounted to CHF 64 million. We enter 2026 with improving momentum, clear drivers for growth and a strong path towards higher profitability. Let me close with a few key takeaways. 2025 has been a transformational year, while the performance also demonstrates the strength of the combined company. We have executed with discipline, successfully integrated the business and delivered ahead of our synergy targets. At the same time, we have delivered on our financial commitments and strengthened our position and customer offering. Finally, we are uniquely positioned to capture the continued growth in software and cloud, supported by our global scale, strong vendor relationships and clear commercial focus. This is a business with improving momentum, a stronger platform and a clear path forward, and I'm looking forward to sharing more about our strategy and priorities on the Capital Market Day in June. Thank you. I'll hand it now back to the operator. Operator: [Operator Instructions]. The first question comes from Mao Ines from BNP Paribas. Ines Mao: Congrats for the strong result today. I have 2 questions. So the first one is the company is guiding for mid-single-digit revenue growth next year. Does this include a recovery of North America region already? My second question is, can you give us more color on why profitability improved so much year-over-year in Q4 in the Services segment? So we expect this margin level as the new normalized level, so to stabilize from here? Or is there more scope for margin expansion in the Services segment? And my final question is... Raphael Erb: Sorry, somehow your voice is not so clear. We can hardly understand. Ines Mao: Can you hear me better? Raphael Erb: Yes, now it's clear. Ines Mao: Okay. I'll restart. So my first question is about next year revenue growth guidance. Does this include the recovery of the North America region in this guidance? My second question is on the profitability level in the Services segment, which has improved quite significantly year-over-year in Q4. Should we expect this margin level as a new normal level, so to stabilize from here or more margin expansion in the Services segment? And my last question is, can you discuss the growth prospects for the Services segment in 2026? And any new offerings that will drive growth? Typically, in Microsoft E7, I understand it will be a readiness assessment conducting by SoftwareOne team. Would you recognize this as the Services revenue going forward? Raphael Erb: Thank you. Maybe I kick off with the first questions around North America. For sure, as we all know, 2025 has been a disappointing performance for us. However, we are making, as mentioned, also step-by-step progress, especially also around our GTM turnaround. Our internal sales metrics and KPIs clearly show that we are making progress. And with that, to answer your question, we are positive that 2026 is going to be more resilient actually and a more predictable year for us in North America, and we are positive that in that region, we will return into revenue growth for the full year 2026. Around the services margin, maybe also, I think if you look into the numbers and the development from 2024 into 2025, it has been a positive progress. So the margin overall has been increasing, and we are positive that this will continue. It will continue as our service portfolio is shifting more and more towards cloud-native capability, also higher value advisory and managed services and support services, which we are having in our offering. I think this will help to further improve and accelerate our overall margins in the services business. Melissa Mulholland: Thanks for your questions. Regarding E7, you're right to call it out. We see this as a strategic opportunity with our Microsoft portfolio as it combines, let's call it, the SKU capability along with AI through Copilot to simplify this for our customers. And we see this to be particularly attractive in the high end of corporate into the enterprise segment. So we're well positioned to capture additional growth opportunities from this. In terms of additional service areas of growth that are implied, certainly, we're going to continue our focus around AI as well as agents and continue to improve the, let's say, the efficiency of the overall services line, which is implied in terms of the overall margin improvement in Q4. Operator: The next question comes from Christian Bader from Zurcher Kantonalbank. Christian Bader: I have 3 questions, please, and I'd like to do them one after the other. First of all, you mentioned several times new business with Google Cloud. And I was wondering what is the revenue potential here? And is this business going to be margin accretive? Melissa Mulholland: Thanks for the question. So with Google and with our channel business in general, this is a new opportunity for us. As we've seen with our AWS channel expansion, it will take time for this to be able to really take effect in terms of the P&L. So we expect this to deliver additional upside in the back half of H2, but more likely in 2027 from a materiality perspective. From a margin standpoint, this is very accretive to our overall channel margins as the channel business is very highly dependent on our platform, Cloud IQ, which gives us more efficiency and scale. So we see this to be particularly attractive across the markets that we are ready to launch with more countries to come. From a margin standpoint, this is very accretive to our overall channel margins as the channel business is very highly dependent on our platform, Cloud-iQ, which gives us more efficiency and scale. So we see this to be particularly attractive across the markets that we are ready to launch with more countries to come. Christian Bader: Okay. My second question has to do with LATAM because you said that you exited 4 countries, Argentina and 3 others. So I was wondering how much of revenue is lost due to the exit of these 4 countries. Raphael Erb: The revenue impact is not significant because those markets are very, very small markets already. There actually the revenue impact from the revenue of 2025 has been very insignificant. Christian Bader: I see. All right. Okay. And then my last question is, is it possible to get some guidance for your investments, both in tangibles and intangibles for 2026? CapEx guidance, any CapEx guidance, please. Hanspeter Schraner: So as we are continuing to invest in our technology, especially in the platforms, the investments will maybe slightly increase, but for sure, have a similar level as in 2025. Operator: The next question comes from Florian Treisch from Kepler Cheuvreux. Florian Treisch: My question is around the Microsoft incentive changes, EA changes. I mean we discussed at length last year being a headwind for SoftwareOne. So the first question would be, have you actually, let's say, delivered better than expected on these kind of headwinds as you have mentioned or flagged that Q4 has clearly been driven by the CSP transition? And then looking into '26, how much of a tailwind can it become? Or would you still assume it's a slight negative impact on the overall business? Melissa Mulholland: Thank you so much for asking. So great question. In terms of Q4 and what we saw for the full year for 2025, yes, we delivered better than expected given the, let's say, negative effect of the EA changes. This was driven by the focus to CSP realization, which I'm pleased to say we delivered. In addition, we also saw the shift to services-based incentives as particularly accretive, and that's also demonstrated in the Q4 profitability improvement overall for services. As we go into 2026, we do not see any headwinds effect with related to the EA incentives. If anything, there will be stabilization of incentives as indicated also by Microsoft. So with that, we will further, let's say, accelerate the growth that we've had around CSP and services as we see that to drive more potential. Operator: The next question comes from Christopher Tong from UBS. Christopher Tong: Maybe 2 from my side. I was just wondering on exceptionals in 2026. What should we expect over here? Obviously, you'll have to take some further cost synergies, but is there anything else we should be mindful of? Hanspeter Schraner: I mean, look, as we already stated, our goal is to narrow the gap between the reported and adjusted EBITDA. So we said it's below CHF 30 million. And of course, you always have certain items to adjust which are non-recurring, but we stick to the below CHF 30 million and with a clear ambition to further decrease. This does not include the Crayon acquisition cost or cost related to the integration, to be clear. Raphael Erb: And maybe to add on, on the cost synergies, as we already mentioned, to date, we are at the CHF 64 million, and we are making further progress on that. We are very committed on our CHF 80 million to CHF 100 million target, which we mentioned. And through that, we should also -- this should also help to make a positive impact also going into H2 on our overall OpEx situation. Christopher Tong: Got it. And I guess maybe on just the outlook and the cadence of revenue growth for the year. You mentioned that profitability would probably be more weighted towards second half. I was just wondering if you think revenue growth would also be sort of second half weighted as well. Melissa Mulholland: Yes. I mean with the seasonality of our business, Q4 is the largest quarter. So you could certainly see that implied growth pick up on towards the back half of the year. Operator: Next question comes from Marc Burgi from Finanz und Wirtschaft. Marc Burgi: I only have one question concerning North America. You already talked about it in length, which is about the growth. Can we expect that in the second half? Or could you maybe be more precise about when that should occur? And just about the general market situation, how is the market -- how is your market position? Hanspeter Schraner: In general, as mentioned, I'm very confident that in North America 2026, we will return into growth overall as a company again, which is very good, given where we are coming from. I also expect in Q1 a better performance than in Q4. So from this perspective, I'm positive that the trajectory is going to improve, and we should see an improvement already in Q1 compared to Q4. Overall, I think the market for us is -- remains to be an attractive market. And again, with the combination of Crayon, I think we have a good chance now with a better overall setup also with the channel business as an additional business line for us. So we continue to be very focused on North America. Operator: The next question comes from Andreas Wolf from Berenberg. Andreas Wolf: Congratulations on the strong Q4. I have several questions. The first one is related to the assessment of the individual regions. Have you already fully assessed the region's performance? Or is there a possibility of impairments also in 2026? The second is related to AI and the adoption of use cases? Do you see opportunities associated with the deployment of on-site engineers to drive use case adoption and ultimately, your business? Question number three. How are AI providers such as OpenAI or Anthropic dealing with resellers? Does this -- does their growth offer business opportunities for you as well? And the last one is related to Microsoft price increases. What do you believe will be the tailwind from those in 2026? Hanspeter Schraner: Let me take the first question regarding the impairments. So what we did in 2025, we do the impairment test on CGU levels, which are the 7 regions. And obviously, there were no impairments based on the current business plans for all regions with the exception of LATAM. LATAM we impaired CHF 8 million. And we believe this is the right number based on what we know today. So based on what we know today, there are no further impairments expected in 2026. Otherwise, you would have impaired already at the end of 2025. Melissa Mulholland: Thanks for your question regarding AI. So I'll start with the first regarding the adoption of use cases. So this is something that we are very much focused on. We always believe that it's important to test internal use cases before we take them to market. And we're also finding ways to drive AI through internal adoption to increase more efficiency and scale also to reduce cost to make us quicker to market to customers. So this is something that, yes, we are focused on, and yes, we are also looking at ways to deploy our internal AI capability to both support customers, but also ourselves. In terms of your question regarding Anthropic, OpenAI, certainly, this is something that is quite exciting to see in the market. Anthropic is certainly an area where we see additional partner opportunity as they need partners like us to be able to deploy and also to help customers manage which AI models should they actually consider. This is where our business model really thrives around complexity. So we help guide our customers around which model makes sense for their data environment, but also how to implement and build those solutions. So we see business opportunity to come out of that. In terms of the Microsoft price increases, I always say Microsoft price increases help our business. So there's certainly a carryforward from that. It also positions us well to be able to support our customers in navigating that price increase as our business has always been focused around cost management overall. Hard to say what the actual implied impact will be, but certainly, we see this to be positive for 2026. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kjell Arne Hansen for any closing remarks. Kjell Hansen: Thank you, and thank you, everyone, for joining the call. And as always, please don't hesitate to reach out to the IR team if you have any further questions. Thank you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good morning, everyone, and welcome to the Xtant Medical Fourth Quarter and Full Year 2025 Financial Results. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors. Kevin, please go ahead. Kevin Gardner: Thank you, operator, and welcome to Xtant Medical's Fourth Quarter and Full Year 2025 Financial Results Call. Joining me today are Sean Browne, President and Chief Executive Officer; and Scott Neils, Chief Financial Officer. Today's call is being webcast and will be posted on the company's website for playback. During the course of this call, management may make certain forward-looking statements regarding future events and the company's expected future performance. These forward-looking statements reflect Xtant's current perspective on existing trends and information and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intends and other words with similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the Risk Factors section of the company's annual report on Form 10-K filed with the SEC and in subsequent SEC reports and press releases. Actual results may differ materially. The company's financial results press release and today's discussion include certain non-GAAP financial measures. Please refer to the non-GAAP to GAAP reconciliations, which appear in our press release and are otherwise available on our website. Note that the Form 8-Ks that we file with our financial results press releases provide detailed narratives that describe our use of such measures. For the benefit of those who may be listening to a replay, this call was held and recorded on March 31, 2026, at approximately 8:30 a.m. Eastern Time. The company declines any obligation to update its forward-looking statements, except as required by applicable law. Now I'd like to turn the call over to Sean Browne, CEO. Sean? Sean Browne: Thank you, Kevin, and good morning, everyone. Thank you for joining our fourth quarter update call. As has been our practice, I will begin with a few prepared remarks about our operations, and then Scott will provide a deeper dive into the financials. We will then open the call to your questions. Okay. We again turned in solid financial performance during the fourth quarter, highlighted by $32.4 million of revenue, representing growth of 3% over the fourth quarter of 2024. Now I want -- I would note that the Companion Spine transaction closed in early December, roughly a month ahead of our original assumption, which cost us about $2 million of revenue in the quarter. Scott will provide the details, but I want to flag it upfront so the headline number is properly contextualized. Importantly, we again generated positive cash flow, adjusted EBITDA and net income, a continuation of the favorable trends we have seen over the past several quarters. Before covering the quarter in more detail, I want to briefly recap our recent sale of our noncore Coflex interlaminar stabilization assets and the international Paradigm Spine entities to Companion Spine, which closed in early December. The final purchase price was approximately $21.4 million, and I'm pleased to report that the transaction is now fully closed and settled. We use those proceeds to reduce our borrowings and strengthen our cash position, and we do not anticipate any need to raise additional outside capital in the foreseeable future. More strategically, this transaction was transformational for our company. It further sharpened our focus on our core high-margin biologics business, which is where our competitive differentiation lies and where we intend to grow. So for the full year of 2025, we generated total revenue of $133.9 million toward the upper end of our previously stated guidance of $131 million to $135 million. Again, remember, that guidance also included a full month of Coflex and Paradigm Spine revenues. And this represented a growth of over 14% for the full year of 2024. Adjusted EBITDA for the full year was $16.3 million compared to a loss of $1.9 million in 2024, a result we are very proud of and one that reflects the sustained operational discipline our team has demonstrated over the past 2 years. Our biologics product family, which is the greatest potential for growth, both from a revenue and cash generation perspective, was essentially flat for the fourth quarter of last year. We have been direct with investors that our recent emphasis on self-sustainability, positive cash flows, tighter operating discipline, in-house manufacturing was intentional, and those goals are now achieved. The strategic initiatives we implemented, our sharpened focus on higher-margin biologics, our emphasis on in-house manufacturing to improve quality and control costs and our more disciplined approach to operating expenses were all pursued with self-sustainability in mind. We are pleased to have delivered on each of them. With that foundation now firmly in place, we are turning our full attention to driving top line growth, leveraging the strength of our biologics product family. On the commercial side, we have been making measured but meaningful investments to expand our reach. In 2025 and into 2026, we have doubled the number of regional sales reps in the field. Those reps are now deployed, ramping up and calling on accounts. This year, we plan to add significant resources to our national accounts team, which will expand our ability to drive institutional adoption at scale across hospital systems and large practice groups. Together, we believe these additions will have an accelerating impact on our biologics revenue as the year progresses. We continue to invest in R&D to bring innovations to surgeons and their patients, and we remain committed to the cadence of new product introductions that has characterized these past several years. So let's talk a little bit about new product launches. Innovation remains central to our strategy, and we continue to build out our portfolio during the quarter. In December, we announced the commercial launch of nanOss Strata, our next-generation synthetic bone graft manufactured from hydroxycarbonapatite, a material with higher solubility than traditional hydroxyapatite, which is the most commonly used synthetic material. Increased solubility enhances the bioactivity of the graft, allowing for better integration and remodeling with surrounding bone tissue during the healing process. Early surgeon feedback has been excellent, and we are encouraged by nanOss Strata's prospects. We also launched CollagenX, our bovine collagen particulate for surgical wound closure designed to promote healing, prevent distance and help mitigate surgical site infection risk. What makes CollagenX particularly compelling commercially is that it is a potential add-on to virtually every case type in our existing biologics portfolio, creating meaningful attach rate opportunity across our current procedure base as well as an entry point into adjacent surgical disciplines we do not currently serve. The size of that addressable market opportunity is significant, and we are very excited about what this product represents for both patients and for our business. As we have said before, but it bears repeating, we now offer and internally produce solutions across all 5 major orthobiologic categories, which includes Demineralized Bone Matrix, cellular allografts, synthetics, structural allografts and growth factors. Additionally, with our [ Amnio ] and collagen product lines, we are also well positioned to grow in the surgical repair and wound care markets. This breadth positions us as the partner of choice in regenerative medicine, a position that has been further reinforced by the very positive feedback we continue to receive from surgeons on these recent innovations. Turning now to guidance. Our 2026 revenue outlook reflects the impact of the Companion Spine divestiture and the expiration of license revenue from our Q-code and amniotic membrane agreements, both nonrecurring items that Scott will address in detail. Offsetting these headwinds is continued anticipated organic growth in our core biologics business, which we expect to accelerate as our expanded commercial team is fully deployed and our newest products gain traction in the field. With that context, we anticipate full year 2026 revenue in the range of $95 million to $99 million. On a pro forma basis, this represents solid organic growth in our core business. We are committed to maintaining positive free cash flow at these revenue levels. And as I noted, we do not anticipate any need for any outside additional capital. Story heading into 2026 is straightforward, a focus on our core business and expanding commercial footprint, an innovative and comprehensive product portfolio and a clean balance sheet. We believe we have the right strategy, the right team and the right foundation to deliver. Now with that, I will turn the call over to Scott for a more detailed review of our financial results. Scott? Scott Neils: Thank you, Sean, and good morning, everyone. I'll start first with our financial results and then conclude by sharing some specific amounts related to our recent divestitures and license revenue for the benefit of looking ahead to 2026. Total revenue for the fourth quarter of 2025 was $32.4 million compared to $31.5 million for the same period in 2024. The slight increase is attributed mainly to higher license revenue during the fourth quarter of 2025 that Sean alluded to earlier, partially offset by declines in biologics and hardware. As Sean mentioned a moment ago, we expect that the measured investments that we're making in our field sales force on both a regional and national basis should drive accelerating biologics growth in 2026 and beyond. Gross margin for the fourth quarter of 2025 was 54.9% compared to 58% or 50.8% for the same period in 2024. The increase is primarily attributable to favorable sales mix and greater scale, partially offset by a $1.3 million inventory charge associated with the launch of the Cortera Fixation System. Fourth quarter 2025 operating expenses were $18.7 million compared to $17.9 million in the same period a year ago. General and administrative expenses were $7.3 million for the 3 months ended December 31, 2025, compared to $5.7 million for the same period in 2024. The increase is primarily related to a $1.4 million of additional expense related to various compensation plans. Sales and marketing expenses were $10.9 million for the 3 months ended December 31, 2025, compared to $11.7 million for the same quarter last year. The decrease resulted primarily from a $0.9 million reduction in commissions. Research and development expenses were $459,000 for the 3 months ended December 31, 2025, a decrease from $522,000 in the fourth quarter of 2024. Net income in the fourth quarter of 2025 was $57,000 or $0.00 per share on a fully diluted basis compared to a net loss of $3.2 million or $0.02 per share in the comparable 2024 period. Adjusted EBITDA for the fourth quarter of 2025 was $1.9 million compared to adjusted EBITDA of approximately $0.4 million for the same period in 2024. Turning now to full year results. For the full year 2025, total revenue was $133.9 million, representing growth of 14% over $117.3 million for the full year 2024. Again, our revenue for the fourth quarter and the full year 2025 were negatively impacted by the closing of the sale of our Coflex assets and international hardware business to Companion Spine in early December, which is about a month sooner than we were anticipating. The assets of the businesses that were included in the transaction were generating about $2 million of revenue per month. Gross margin for the full year 2025 was 62.9% compared to 58.2% for the full year 2024. Of this increase, 530 basis points were due to sales mix and greater scale, partially offset by a decrease of 260 basis points due to increased charges for excess and obsolete inventory. General and administrative expenses were $29.5 million for the full year 2025 compared to $28.7 million for the same period in 2024. This increase is primarily attributable to $2.4 million of additional expense related to various compensation plans, partially offset by a $1.2 million reduction in expense for stock-based compensation. Sales and marketing expenses were $45.5 million for the full year 2025 compared to $49.2 million for the full year 2024. This decrease is primarily due to reduced commission expense, $3.9 million resulting from revenue mix and $2.1 million of reduced compensation expense related to headcount, partially offset by $2.9 million of additional consulting fees. Research and development expenses were $2.1 million for the full year 2025, a modest decrease from $2.4 million for the full year 2024. Full year 2025 total operating expenses were $77 million compared to $80.3 million for the full year 2024. Net income for the full year 2025 was $5 million or $0.03 per share on a fully diluted basis compared to a net loss of $16.5 million or $0.12 per share for the full year 2024. Adjusted EBITDA for the full year 2025 was $16.3 million compared to an adjusted EBITDA loss of approximately $2.3 million for the full year 2024. As of December 31, 2025, we had $17.3 million of cash, cash equivalents and restricted cash compared to $6.2 million as of December 31, 2024. As Sean alluded to earlier, our cash balance as of December 31, 2025, excludes the $10.7 million that we subsequently received from Companion Spine and satisfaction of the unsecured promissory note of $8.2 million issued to Xtant by Companion Spine related to the Coflex transaction, plus accrued interest and related working capital and other purchase price adjustments. Net accounts receivable was $17.8 million, inventory was $30.3 million, and we had $3.8 million available under our revolving credit facility as of the end of the year. Turning now to nonrecurring revenue and related expenses for 2026. Total revenue for the business sold to Companion Spine was $20.3 million for 11 months ended November 30, 2025. We will include disclosure of the 2025 quarterly revenue amounts on Xtant's investor website. Cost of sales and operating expenses for those disposed businesses were $6.6 million and $15.4 million, respectively, for the same period. Also, with respect to the $18.7 million of license revenue recognized during 2025, please note that the related sales and marketing expense was $3.7 million. That concludes the financial overview. Operator, you may now open the line for questions. Operator: [Operator Instructions] Your first question is coming from Ryan Zimmerman with BTIG. Iseult McMahon: Scott, this is Izzy on for Ryan. So I just wanted to start out on the outlook for 2026. I know guidance excludes Coflex, Cofix and the OUS business. But I was curious if you could kind of unpack what your thoughts are for underlying organic growth, especially in the core biologics business. . Sean Browne: Scott, I'll let you dive in, and I'll add any color. Scott Neils: Sure. I think as we look out through 2026, we're going to be looking for sequential quarter-over-quarter growth, which will reflect the growing contributions of the new product offering Sean mentioned as well as the expanding impact from additions to our commercial organization. I will note, though, that seasonality will still be present. So thinking of Q3, for instance, we're likely to see less sequential growth there than in other quarters. I think maybe setting Q1 as a baseline, for example, starting biologics or with biologics to your point, I expect biologics in the first quarter to be down low double digits compared to Q1 of 2025 in response to headwinds related mainly to lost Amnio product and for hardware to be down approximately mid-teens after adjusting for the revenue associated with the divestiture in 2025. Does that help, Izzy. Iseult McMahon: Yes, that's really helpful. And then you kind of touched on it already with the low double-digit decline for first quarter. But how much of a headwind are you expecting in 2026 from the loss of the license revenue relating to the Q codes? Sean Browne: I think it's more -- okay, so first of all, all of that, the Q code revenue all goes away. However, what we are waiting to see and is still shaking out is what is the base of that business now going to be because we still manufacture a really terrific product line that will be used in advanced wound care by distributors and others. Now what's going to be different is that as this continues to shake out, more of those distributors will be using our contracts, and it will be actually [ Xtant ] brand. So we expect as the year progresses, we'll see that business begin to ramp up, and we feel good about some of the discussions we've had with many of the groups that are out there today looking for a product to sell into hospitals because, as you know, in the advanced wound care world, we're going to see a lot more patients being shifted from the non-acute facilities to acute. And so we see an upside that's going to be coming our way really starting probably -- well, I guess, guys who are in this market a little more than we are, would tell you it's probably going to be looking more like sometime in the late second quarter to the second half of the year where we'll start to see the pickup on that. But in the first quarter, we [ OEMed ] a fair amount of product for guys last for manufacturer, I should say, distributors last year under their brands. And so that business has gone away. But now the business that will come back will most likely be product that will sell under our brand, and it will be into hospitals. Does that answer your question? Iseult McMahon: Yes, that's really helpful. And then just the last one for me. I was curious how quickly you guys are expecting to see a decline in the hardware business throughout 2026. Sean Browne: I think the best way of looking at hardware is we will see a slow decline throughout the year. So yes, so I'll just leave it at that. Scott, do you want to add any color to that? Scott Neils: Yes. I'd simply say that we've already seen a decline in the hardware that remains post divestiture, and we expect that, that decline will continue at a reasonably steady rate approaching high teens in 2026. Operator: Your next question is coming from Chase Knickerbocker with Craig-Hallum. Chase Knickerbocker: Maybe I just wanted to start on kind of that cadence of biologics growth that's kind of implicit in all that commentary that you just gave. It calls for, call it, kind of last 3 quarters kind of acceleration and kind of organic year-over-year biologics growth. Sean, can you maybe just walk us through kind of which products in particular you kind of expect to support that kind of the -- just help us, I guess, bridge to their kind of by product as far as what you see accelerating growth? And then kind of same question as far as how much of that comes from your distribution network versus kind of white label contracts, white label business that you have visibility on? Sean Browne: Sure. So starting off with the different products. So all of the advanced biologics products that we're now manufacturing. So when you think about our OsteoVive Plus, which is the stem cell product, our OsteoFactor Pro which is our growth factor product, the CollagenX product we just rolled out our Trivium product, which is an advanced demineralized bone matrix product. Those are the ones that I see, quite frankly, all of them expect to grow, but those are the ones that are going to be the big drivers. And those are the ones that if you look at our funnel today, which I'm really excited about because this is something with the added sales people new opportunities that we're looking at these days is substantially greater than what we've had really, quite frankly, ever. And with this advanced portfolio, we're touching on a lot more -- a lot of areas in and around spine. So when we start looking at the number of trauma, foot and ankle and other opportunities that have come our way, it's become substantially greater. So those would be the product lines that I would say that will be driving what we see as our growth. Chase Knickerbocker: And then just as far as channel, Sean, white label versus your own distribution network? Sean Browne: So yes. So when we think again about the biologics business, we'll look at our channel or our OEM channel about 20%. Scott, is that right? About 20% of our growth this year or 5% of our overall biologics business will be in the OEM channels that maybe a little higher, like 22%. Is that about right, Scott? Scott Neils: Yes, that is about right, Sean. Sean Browne: Yes. Chase Knickerbocker: And then a couple as we think kind of longer term, Sean, as we think about kind of direct -- your distribution network, white label, potentially kind of some larger contracts with institutions, like where do you see over the medium term, your business kind of showing the most growth? Is it these white label contracts? Is it continuing to be in your distribution network? Just some thoughts there as far as kind of where you're really leaning in. Sean Browne: Yes, especially given the fact that we had -- it will definitely be the Xtant branded product working through our independent agent networks, mostly because, quite frankly, that's where we had the most significant reduction over the 2024, 2025 years in way of we lose a person didn't replace them. And so we had -- and that was strategically a choice we made. Strategy is about choices. And our strategy was we need to get to self-sustainability and that meant building products internally, being able to have our own products that we feel really good about that are advanced, give us the much higher ASPs and better margins. And so these are decisions we made. Now we've replaced and then added basically doubled the size of the sales force. And that sales force is focused on our Xtant branded products. And so when you see the growth that will be coming out, it will be coming from really what I see has been a down to flat independent agent network. We have a real opportunity to really start growing that world again. And so we're feeling really good about where that's going. Chase Knickerbocker: And then two, just to finish for me on -- maybe on hardware. That business is obviously a lot smaller than it has been for you in the past. You expect it to decline. What are your kind of plans there over the medium to long term? Is that a little bit of a melting ice cube for the business that's obviously kind of drawing down growth on the overall top line? Just kind of give us your strategic thoughts there. And then just with kind of all the movement in the portfolio, can you give us a little bit more kind of color on gross margin in 2026? And sorry if I missed that during your prepared remarks, Scott. Sean Browne: I'll let Scott address the 2026. I'll address the hardware issues. So hardware for us, where we are good in hardware, we're really good. Like we have this new Cortera line, which is outstanding. We have a cervical offering that is as good as -- it's actually better than almost anything else that's out there. So we do adult degenerative spine really well. The question is, at what point in time does this become something that becomes a strategic distraction. And at this point in time, it's still helping to set the table for some of our biologics business. So I guess the point is at what point do we kind of look at this and say, when doesn't it? And does the, I guess, the drag on growth become more than it's worth. And so we're not there right now. And -- but it is something we're looking at. So I'll -- without getting too deep into that, but that is clearly high on our strategic list of things to choose or decide. And so that's something that we'll be working on over the course of the next year or so. Scott, do you want to answer the gross profit margin question? Scott Neils: Sure. I think over the course of 2026, we're probably going to be running low 60s in terms of gross margin. As far as the puts and takes within that, -- the new product launches, these higher-margin biologics launches that we've done have had the desired effect in terms of what they've done to our overall biologics product margins. However, what we've seen out of hardware is that really the nonproduct costs, say, excess and obsolete charges, for example, have offset to some extent, the positive contributions from those new biologics product offerings. So net-net, I think we're probably running low 60s in way of gross margin during the course of 2026. Operator: Thank you, everyone. This does conclude our Q&A session at this time. This also concludes our conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation. Sean Browne: Thank you.
Sara Cheung: Good day, everyone. Thank you for joining the online briefing to discuss the First Pacific 2025 Full Year Financial and Operating Results. The results presentation is available on First Pacific's website, www.firstpacific.com under the Investor Relations section Presentation page. This results briefing is being recorded, and the replay will be available on First Pacific website this evening in the Investor Relations section. For participants from the media, please note the Q&A session is open for investors and analysts only. If you would like to ask questions, please contact us when the briefing is finished. Today, we have with us our Executive Director, Mr. Chris Young; our CFO, Mr. Joseph Ng; Associate Director, Mr. John Ryan and Mr. Stanley Yang and other senior executives from the head office of First Pacific. Over to you, John, for the presentation, please. John Ryan: Thank you, Sara. I'll just go through very quickly the First Pacific part of this presentation, then we'll move to the Q&A for you folks. Now let's begin on Page 3 with a quick reminder of some of our major investments, all of which have done pretty well in the course of 2025, and we'll discuss this later on. Now on Page 4, we've got the shape of our gross asset value on December 31, 2025. The gap was about $5.3 billion, Indofood just over 1/3. MPIC valued there at $1.3 billion, the U.S. dollar value of the pesos we paid for it when it was privatized back in the autumn of 2023. We own now about 49.9% of MPIC. You might see there that PLP's valuation has increased to $398 million, and that's because we've put some money into it to help finance the building of a new power plant, which our financial controller, Richard Chan might discuss later if that's of interest to you folks. And then, of course, there's PLDT, our 25% or so owned telephone company. And then there's the Philex Group of companies, which make up just over 10% of our gross asset value. Now let's move on to the earnings for 2025 on Page 5. Turnover was up 2%, a little over $10 billion, higher revenue at Indofood and MPIC. Decline at PLP, PacificLight Power. Contribution from operations reached a record high. I believe like the recurring profit, it's been about 7 years in a row, we've had increases in the previous 5 have been records. Indofood, PLDT, MPIC highest-ever revenues and MPIC delivered their highest-ever earnings as well. Now recurring profit, as I say, it's up a good double-digit, 10% to $740 million, up from about $673 million in 2024. Net profit was up a similar number, 10% to another record high, $661 million. Now to a matter that is dear to the heart of many shareholders. The directors approved a final distribution of HKD 0.14 a share. You folks will vote on that at the AGM. And that brings the full year distribution to HKD 0.27 a share, and that's the highest ever on a per share basis that we have ever paid out. And that, of course, fits under our progressive dividend policy where we're committed to increasing the per share amount of money we distribute to shareholders every year apart from special circumstances. As you can see on the middle chart here on the right-hand side, the increase in recurring profit was driven mostly by MPIC and Indofood, and there were little declines at PLDT and PLP. Head office cash flow, as you can see, we had about HKD $311 million of dividend income, and there are the distributions gone out to you folks. That's the biggest amount of money sent out. And then the net cash interest expense follows. And if you look deeper into this book or want to discuss it later, you'll see that our interest bill is declining along with the interest amount that we're paying. Over on Page 6, a little bit more detail on our cash flow and balance sheet. As you can see here, at the present day, we have no borrowings falling due until September 2027 when our only bond, $350 million becomes due. A $200 million that was due in 2026, as you can see, has been shifted over by 5 years to 2031. Our interest cost is around about 4.6% for the year, and the average maturity is about 3.2 years. And I would guess over the course of the next 12 to 18 months, that 3.2 is going to become a bigger number. Our CFO, Joseph Ng, will discuss that in the Q&A, if you like. Dividend income there on the bottom left shows that we've been consistently over $300 million in recent years. And very important to us is the interest coverage ratio, as you can see, was 4.5x in 2025. That's up from 4x the previous year, and that is well above our comfort level. Though it must be said, we don't have any plans for that number changing anytime soon on account of additional borrowing by us. Now I'll wind up the narrative part of this meeting with a quick look at the reason that many people are invested in First Pacific. As you can see from 2018 to 2025, we've had over a doubling of our profit at First Pacific. I think in 2018, it was around $290 million in recurring profit, and we're up to $740 million in 2025. As you can see, the exchange rates of the rupiah and the peso were down about 11% and 14%, respectively, over that time. And what this does is it illustrates quite vividly the hard currency security of putting your money in First Pacific so that you can secure the gains to be had from the fastest-growing economies in the world, which are described by the IMF over in that bottom right-hand chart, where you can see there's a doubling over the 10 years to 2030 from 2020. Let me actually very quickly go through the main companies. Indofood had record sales, as I said. Core profit was up just 1% to a highest-ever level. Many of you may have attended their investor briefing earlier today. If you haven't, we can discuss some more about their description of their earnings and predictions for the future, many of which we have put into the outlook for 2026. To speak briefly about that, there's an inference you can make that 2026 will be rather better than 2025. But of course, we have that devil in the Middle East conflict, which we don't know how it will affect any of us going forward. We can discuss this later on, if you like, but there's pretty high confidence over at Indofood. Now we're going to flip a few more pages to Metro Pacific, looking at Page 14. Record high earnings, as said before, core profit up 15%. And as you can see in the pie chart, most of it was contributed by the power company, Meralco, which is beginning to see a huge contribution from its still fairly new power generation business. They bought into a very large LNG terminal accompanied by 2 natural gas-fired power plants in Project Chromite. Stanley Yang, who worked on that transaction, can help discuss that later on. It just addresses that generation is going to be a big part of earnings growth at Meralco going forward. The newly listed water company, Meralco, also was a very big contributor to the earnings there. And then the toll roads, their contribution, as you can see, didn't grow so much as illustrated on the bottom left. And that's because we owned -- in part, it's because we owned a little bit less of it than we did earlier. Now let's dash ahead to PLDT, which is the biggest telecommunications firm in the Philippines. Service revenues, record high. EBITDA at a record high and the EBITDA margin still very strong at 52%. Core profit rose 1%, actually a similar number to Indofoods. And it was helped for the first time ever by Maya, which is the 38% owned fintech, which has -- it's the only digital bank in the Philippines, which is both owned by a telecommunications firm and has a banking license. It's a very interesting little company, and it moved into profit for the first time during the course of 2025. And the falling column chart on the bottom right there shows you the usual story. It's data that has been driving earnings growth and fixed line voice, too, in a kind of funny way. There's a big international element there. Now we'll skip past Maya and over to PLP, which had earnings slightly down. Sales were a little bit down as well. Market share is steady at 9.6%. And as you can see, the monthly average electricity prices are down quite a bit from those powerful period of earnings we had in 2023, and that's really the main driver of how their earnings have gone over the past couple of years. Net debt is absolutely negligible at less than SGD 40 million. Now over to Page 27, where Philex Mining, which has been operating Padcal for 6 decades, I think, and it's still going strong for another few years until 2028, I believe. You can see that after 6 decades, the grades of gold and copper there in the blue box, they're rather lower than you might want to see. But if you want to see better turn the page to the Silangan project, which is accelerating towards the opening of commercial operations over the next weeks and months. And you can see that the grades there in the middle box are much, much higher than what we've got going on at Padcal. We're very excited about the prospects for Silangan, and we think it's going to be a good solid contributor to First Pacific going forward and to its parent, Philex. Now I'm going to end the introduction with a quick dash to Page 52, where I would like us all to pay attention to the second line, China Securities Depository and Clearing. They're probably up at this day, close towards 150 million shares. We have now a third brokerage about to start equity research coverage of First Pacific for Mainland investors. And this has been almost entirely due to the efforts of my colleagues, Sara Cheung, who's here 2 seats away. And these new Mainland investors provide much valued liquidity to the share trading in First Pacific, and we welcome them with open arms. That's it for the opening narrative. We can move over to Q&A. Sara Cheung: [Operator Instructions] John Ryan: Jeff, could you unmute and ask your question, please? Ming Jie Kiang: Maybe starting with 2 from me. So it is all about dividends first. So I just want to check, the regular final dividends increased 3% year-on-year, which seems to be a little bit muted compared with what we saw in the past. But separately, you also pay a special dividend with respect to Maynilad's subscription shares. So just trying to check whether the regular dividend growth this time is whether a sign of caution on the outlook or whether we are trying to smooth out the total DPS growth down in the next few years, including the specials. So that's the first one. The second one would be about Indofood payout. I understand the dividend will be decided in the AGM in the next couple of weeks. So just trying to figure out, from your perspective, are you seeing any particular resistance for INDF to raise the dividend payout ratio in the future? John Ryan: Jeff, you know our CFO, Joseph Ng, he'll deal with the first question, and I'll ask our Executive Director, Chris Young, to deal with the second. Hon Pong Ng: Jeff, it's Joseph here. I think your 3% is only focused on the final, if I'm guessing your question correctly because last year's final is 13.5 and this year's final is 14. But in aggregate, if you aggregate the interim and final last year was $0.255 and this year, it's altogether $0.27 because we paid $0.13 for the interim. So there's a 6% growth, which is not the 3%, so it's not insignificant. But if you add back the so-called special distribution we make as a result of the Maynilad IPO, we pay another [ $0.15 ]. So as indicated, I think we have almost 10% growth against last year's 25.5%. So that's broadly in line with the growth in so-called recurring earnings line from last year's $673 million to this year's $740 million. So it's 10% growth in the recurring, which is a key KPI indicator for us. So broadly in line, regular growth -- regular dividend growth or distribution growth is 6%, but all in, it's 10% growth. Now with that $0.27 altogether, I think we are paying altogether about $150 million plus. And that also needs to tie to what we disclosed in the cash flow that for 2025, we have $311 million dividend income. So you can see that it's more than half of the so-called gross dividend line that we are returning to the shareholders even without including the so-called special distribution. And then you have the head office overhead and the like. And remember, Jeff, also starting from 2025 and more heavily in 2026, we need to kind of reinvest some of the money that we have from the dividend from the units and then we invest those money back to PLP to fund its equity requirement for the new gas plant there. So we try to kind of strike the balance as to what we return to shareholders, which is not a small ratio, which is quite a high ratio. If you take out the head office expenses and interest, we are returning more than 70% of free cash to the shareholders and keep a little bit for our reinvestment into the PLP gas plant. So I think that's the kind of macro thinking behind kind of fixing the final dividend at $0.14 per share and making a total of $0.27 regular and then about 10% growth in aggregate, including a special dividend we paid to the shareholders as part of the Maynilad IPO. So that's on the dividend side. On the Indofood dividends, maybe Chris could chip in and give us a bit color on that. Christopher Young: Jeff, I think the -- normally, as I think you're aware, it's a discussion with the management there at Indofood. And generally, it's a fairly constructive discussion. I think we would take into account 2 elements in considering that dividend. So I think if you look at John's presentation or you've seen the Indofood results, the recurring profit growth last year for Indofood was 1%. And the outlook at the moment looks reasonable without too much disruption from what's going on in the Middle East. But obviously, there is a bit of uncertainty. So that would be the context to the discussion, what was the underlying growth last year and what is the outlook. But as you yourself noted, that discussion will happen over the next couple of months. John Ryan: Okay. Now we'll ask Timothy Chau to unmute and ask what he's got to ask. Tak-Hei Chau: I have a couple about Middle East first. First, on Indofood. I understand just now management talked about like how the Middle East impact seems to be minimal on Indofood. But I'm just wondering if there will be any implications on the raw material cost because I think over the past year, there reportedly some kind of a raw material price hike that affected the margin. So I'm just wondering if the Middle East, if extended kind of -- being extended event, would that aggravate? And the second question also about Middle East will be on PLP because if I remember correctly, the electricity price in Singapore could actually be moved as long as the gas price is up. So I'm just wondering if there will be any positive read-through from Middle East on PLP here. Yes. And my last question is on the PLP project. So just wondering if there is a finalized budget on the potential CapEx spend on the project yet. And just now you mentioned about like how we have already been spending some -- investing some in PLP already on that particular project. Just wondering the time line of the entire CapEx and how it will be in the coming 2 to 3 years. John Ryan: Timothy, I'll take a stab at the first one and then Stan will help you with PLP. Indofood told us in their briefing this morning that as far as wheat goes, they've got 3 or 4 months of supply on hand, and they see that it looks like there's globally going to be a good crop of wheat better than the previous year in 2026. So they're not too worried about that. CPO prices are up a bit after rising 10% in 2025 to about IDR 14,100. They're around at the end of the first quarter, IDR 15,000. They are in some not feeling any particular pressure from raw material prices. And as far as the Pinehill businesses in Middle East and North Africa, they have been able to secure their supplies up to now. And there is, as of yet, no particular concern. PLP, Stan? Stanley Yang: Sure. Timothy, just to address your questions on Pacific Light, first on the electricity prices and the impact of the Middle East fuel. And for PLP, it's gas comes from a global supplier, in this case, Shell. And there is some impact in terms of some of the flow in terms of the LNG that's supplied into Singapore, some of the disruption. It's a relatively small portion, a minority. And I would say that at least for the next month plus, there's sufficient supply. But when you get beyond it, there will be some impact in terms of the supply coming in that would typically come from the Middle East. Alternate arrangements are being made. The company as well as other generators who are affected in the market are also in discussions on solutions that would help, including having some of the gas supplied by EMA and being able to run, but also others in terms of the existing contractual arrangements that they can procure in terms of their global supply. And so we think in terms of certainly the near term, there will be less impact. But as the months go by and if this crisis continues, then some of these alternatives on how the balance of gas will be filled in light of the retail contracts for the company will need to be covered. When it comes to the project itself, the project itself is looking at starting in 2029. And so the heavy lifting in terms of the construction and so forth is still to come. And so within this year, there would be an expectation of the notice to proceed, which basically kicks off the formal development and projects. And from there, the piling works and then subsequently over the next couple of years, the balance of the plant. And so that CapEx as we would look at it would be spread across the next few years up until the planned operation date in 2029. Tak-Hei Chau: On PLP, the rise in gas price, if I remember correctly, I think back in 2023, when the gas price is up, we actually have a higher profit because of the nonfuel margin being higher. So I'm just wondering if this case, given -- I mean, given the case is not as bad as like the lack of supply in gas in the end. So I'm just wondering if there will be any positive read-through for PLP in this case or we are still cautious about our outlook? Stanley Yang: I think it's too early to make a call. I think the next couple of months will be critical. I think because the company has a strong position with respect to its retail customers for this year, then there is definitely visibility, but the impact of any supply disruption, not just for our company, PLP, but also for the entire market in Singapore. The question will be the balance of any gas that comes from the affected markets, for instance, Qatar and how that would impact the entire supply. As I mentioned before, that's not the majority of the supply. It's a minority small -- relatively small percentage, but it is one that we are monitoring because that clearly, the supply in aggregate into the market has to balance with what the generation demands will be for running the plants. John Ryan: Any more questions, Jeff? I think Jeff has another question. Jeff, please unmute and ask your question. Ming Jie Kiang: So maybe switching gear a little bit to MPI, just trying to figure out how should we think about maybe the water Maynilad that business in 2026. So just trying to -- if there's any tariff adjustment, can you remind us over there, but if not, I just want to hear your maybe general assessment on MPI's 2026. That's my first question. The second would be just talking about the FP Natural Resources, which we usually do not really focus on. Just trying to understand why the loss contribution diminished in 2025? And is there any one-off events there? John Ryan: Stan? Stanley Yang: Sure. On the question of the -- you're talking mostly on the water, was it? John Ryan: Yes. If we can expect some tariff increases in 2026 following the 10% last year. Stanley Yang: This year, it's going to be more muted than the last year in terms of the tariff impact. There have been following the revision -- the revised concession agreement, a series of adjustments over a few years. Those have had the benefit in terms of the flow into Maynilad and the system. This year, it would be 4% though, is the expectation in terms of the tariff adjustment. And the business itself will continue to grow. The supply of water and the management's efforts to improve that. I think they focused heavily on the non-revenue water, which is the losses in the system and bringing that down to levels that the company has not seen ever since our existence in owning the business. And so for us, that's a big savings that helps improve the cost of the water supply and efficiency in the system. And then the management themselves are focused on continuing to improve that along with the continuation of tariffs as part of their CapEx program, which was agreed as part of the concession agreement that they revised. Those would be the key imperatives to continue to build on that business. John Ryan: Okay. Thank you. And second question. Jeff, you remind us, please? Ming Jie Kiang: Yes, the FP Natural Resources, just trying to figure out what -- why did the loss diminished in 2025 compared with 2024 and just trying to check if there's any one-off events driving the narrow losses or anything happened there? That would be helpful. John Ryan: Chris? Hon Pong Ng: Actually, maybe I could take that. It's Joseph here. Yes, I mean, that operation -- the sugar operation has -- basically has stopped. And then basically, we are laying off all stock and trying to basically sell the residual assets owned by the operation. I mean, previously, the alcohol operation and then we are in discussion of selling this kind of final set of operating asset, refinery asset with certain investors, certain buyer. So with that, actually, the scale of the operation basically stopped. So that's the reason why you see the recurring profit line, there's actually no -- without any significant amount there. But we do make some impairment provision as a result of selling those refinery assets that I mentioned because now we have identified buyer, we're in final discussion with the buyer. So we know that the final selling price of the refinery part is lower than the book value. So there's certain impairment provision mix below the line under the nonrecurring item. But above the line, there's basically no operation anymore, no significant operation. That's why you see there is very little impact to the recurring profit line. Ming Jie Kiang: Just -- I would just want to take the chance to just have one more quick follow-up or just other question. So just I want to hear our plan for refinancing the head office borrowings. So John mentioned we have refinanced the repayable loan in 2026. And just trying to figure out how do we think about the current maybe the head office net debt, cash interest coverage ratio and also our maturities schedule down the next maybe 2 years. Hon Pong Ng: Yes. As mentioned by John, we finished the refinancing of the January 2026 bank loan. We actually signed up the commitment before the end of last year. So we just draw the facility and paid off the bank loan in early January. So that's all done as far as 2026 liability management initiative is concerned. So the next one coming up from this bar chart is the bond, $350 million bond due in September 2027. Now we still have, as of today, maybe 18 months to go. So it's still early, but as part of our usual prudent financial management, we are actively looking into that and talking to a number of banks. We are getting proposals on, say, refinancing the bond with another bond. So we have received quite a number of proposals with different quotes. Now we are not in a rush to say because the whole market is so volatile. You probably understand from the market that actually both the bond investor side and many issuers are actually waiting on the sideline to see how all these Middle East crisis will turn out and how that would affect the interest rate environment in the next 6 to 9 months. And for us, I think the plan is that we have 18 months to go, but we should get ourselves ready probably when we get into the second half of this year. We will probably kind of accelerate a little bit on the preparation process and see what will be the revised kind of terms and pricing that we could get from the different banks. And in parallel, of course, we will try to explore other alternatives like syndicate bank loan if we think that those terms and pricing are more attractive. But of course, I mean bank loans will not give you the tenor that we could get from the bond market, the 7 or 10 years. As you can see from the debt maturity profile here, if you get another 5 years, probably you get into the 2021, 2022 space, which may be a bit clouded. So our preference will be still a bond. For one, the tenor; two is to diversify the credit resources so that we don't 100% rely on the bank financing. So that's the initial thinking because we always try to strike a better balance between the bank credit resources and the bond credit resources. So the preference is to go for a bond if the market is there and if the terms and pricing are palatable to us, but we never say never. We just wait until the whole market comes down a bit and the whole bond market becomes active again. Ming Jie Kiang: Maybe can I have a real quick follow-up? I promise, this is my real quick. So just as of the end of 2025, I think you disclosed 54% of the debt is on a fixed rate basis at the head office level. So is this split some sort of optimal in your opinion? Or should we be targeting more fixed rate borrowings as we think for the next maybe 3 to 5 years, given the volatile interest rate environment, sometimes we rate cut, sometimes the expectations just bounce around. So just trying to figure out the thinking here. Hon Pong Ng: Yes, Jeff, these are difficult questions because the interest rate environment is actually shifting back and talk and sometimes they say, I mean there will be one interest rate cut this year and followed by 2 next year and now they are maybe shifting a little bit, given the fact we will be shifting the position, maybe not 2 rate cuts in 2027, maybe 1. I mean all these are subject to changes since the whole market is so volatile. So with that sort of volatile situation, it's really difficult to say that we should increase the hedge ratio to a higher level or we reduce it. As of now, I think we are quite comfortable with what we have. We're probably 50% thereabout because you can't win all and you will not lose all as of now. That's what I can say for now. John Ryan: Okay. And I believe, Timothy, please unmute and ask your question. Tak-Hei Chau: Yes, sorry. Management, it's me again. Just a really quick one on potential corporate events. I think this year, a lot of different conglomerates have been -- the theme has been capital recycling, unlocking asset values. I'm just wondering, given our very diverse and broad portfolio, are we -- do you have similar stuff that the management is looking to maybe divest some kind of non-core or at least partially divest like an IPO, for example, like a Maynilad kind of thinking to really unlock the asset value and maybe pocket some kind of funds as well. Especially, I think I've read somewhere in the news about potential IPO or list or private placement for Maya. And like back in the days, I think there were also some market chatters about the private placement for MPTC back then to help relieve the financial issues for the total assets. So I'm just wondering is there anything regarding corporate events that the company is thinking about now? Stanley Yang: Certainly, as a holding company, we look at a span of initiatives, both on the M&A side, which you've seen over the last few years and also in terms of capital markets, we raised the example of the Maynilad's IPO. When it comes to, as you pointed out, Maya, it's a business that has improved quite a bit. The growth of both the wallet and then subsequently after that, taking the leadership, both in the merchant acquiring and now in the digital banking side has really pivoted that platform from what was quite small a few years ago to now the leader and continuing to grow rapidly. Whether this is the year that at this time, a listing could be done, I think we would -- management and the shareholders are always reviewing the strategic options. I think actually an interesting similar case was there was the Japanese fintech recently PayPay that just listed earlier this month. And despite the challenges of the market, Iran and so forth, actually, the price held up quite well. So I think it's fair to say that we will continue to monitor if there is an opportunity. Of course, Maya is much smaller than the one that listed in Japan, but its growth and its trajectory are moving in a very positive direction. And so we would see this as a potential as it continues to grow. Really, the question is in terms of timing. And I would say with respect to other portfolio companies and across the group, I think we continue to evaluate how we can improve the positions of them in their respective sectors. And as and when decisions are undertaken to pursue things more formally, then, of course, we will provide more guidance at that point in time. John Ryan: MPTC? Stanley Yang: I think MPTC, at the moment, the business is continue to focus on delivering this year its projects. They have quite a number of projects within the Philippines that are looking to complete. And so that's really been the focus. Also some of the deleveraging efforts of management because of the acquisitions that they've undertaken in the last few years, those are the principal initiatives looking at partners and some capital into the business to help in terms of the debt reduction of the overall roads. And then with that, we continue to also consider whatever strategic opportunities are to further enhance our position as a platform and the shareholders of our roads business. John Ryan: Thank you very much, Stan. As there are no more questions and time is getting on, we'll wind up now beginning with a reminder that we will be visiting fund managers in Europe and North America after Easter holidays. If you would like to see us, please get in touch with me or Sara or my colleague, [ fionachiu@firstpacific.com ]. These meetings have historically been quite worthwhile for the fund managers who see us because we cannot hide our feelings on our face. You'll see us coming in and we'll be feeling really, really good, and that will be important to your perspective towards our company. And now to summarize how we feel and where we think we're going, I turn now to Chris Young, Executive Director. Christopher Young: Okay. Thank you, John, and thank you for joining us on the call today. The results, as you've seen for 2025 were good and a continuation of the trend that we've seen over the last 7 years or so. However, clearly, the outlook in the short to the medium term is somewhat uncertain. However, I think we remain cautiously optimistic that given the nature of our businesses, which I think are quite defensive given the consumer-facing nature of them, that we will be able to shelter the group really from these uncertainties over the next few months or so. So we look forward to updating you again on the half year results, which I think are at the end of August 28. So until then, we will keep you informed on a regular basis. And as John and Stan will be visiting Europe and the U.S., hopefully, you will get a chance to meet with them face-to-face before that. So turn you back to Sara. Sara Cheung: Thanks, Chris. Thanks again for joining today's online briefing, and you may disconnect now. Thank you. John Ryan: Bye-bye.
Operator: Good morning, ladies and gentlemen, and welcome to the DiaMedica Therapeutics Full Year 2025 Earnings Conference Call. An audio recording of this webcast will be available shortly after the call today on DiaMedica's website at www.diamedica.com in the Investor Relations section. Before the company proceeds with its remarks, please note that the company will be making forward-looking statements on today's call. These statements are subject to risks and uncertainties that could cause the actual results to differ materially from those projected in these statements. More information, including factors that could cause actual results to differ from projected results appear in the section entitled Cautionary Statement Note regarding Forward-Looking Statements in the company's press release issued yesterday and under the heading Risk Factors in DiaMedica's most recent annual report on Form 10-K. DiaMedica's SEC filings are available at www.sec.gov and on its website. Please also note that any comments made on today's call speak only as of today, March 31, 2026, and may no longer be accurate at the time of any replay or transcript rereading. DiaMedica disclaims any duty to update its forward-looking statements. Following the prepared remarks, we will open the phone lines for questions. I would now like to introduce your host for today's call, Rick Pauls, DiaMedica's President and Chief Executive Officer. Mr. Pauls, you may begin. Dietrich Pauls: Thank you, Morgan, and thank you all for joining us for our fiscal year 2025 earnings call. With me this morning are Dr. Julie Krop, our Chief Medical Officer; and Scott Kellen, our Chief Financial Officer. Looking back for a moment, 2025 is a year in which we made significant progress across our pipeline, achieving a number of key milestones. As most of you know, our lead candidate, DM199, is a recombinant form of the naturally occurring KLK1 protein, a serum protease that acts through the bradykinin 2 receptors in the walls or endothelium of our blood vessels to increase the level of nitric oxide, prostacyclin and endothelial-derived hyperpolarizing factor. The combination of these factors has the potential to more effectively enhance blood flow and vascular health than any other factor given by itself. We believe that this mechanism is why DM199 is so well suited to improve patient outcomes for preeclampsia, fetal growth restriction, acute ischemic stroke and other indications associated with vascular pathology. I'll now turn the call over to Julie to provide an update on our preeclampsia and stroke programs. Julie Krop: Thanks, Rick, and good morning, everyone. Starting with our preeclampsia program, 2025 marked a very strong year of progress. In July, we announced positive interim results from Part 1a, the ascending dose portion of our investigator-sponsored Phase II trial being conducted in South Africa. These results showed that DM199 produced statistically significant reductions in blood pressure and in the uterine artery pulsatility index, consistent with reductions in vascular resistance that suggest a potential improvement in blood flow to the placenta. Importantly, the interim data demonstrated that DM199 did not cross the placental barrier. These interim results were observed in hypertensive women expected to deliver within the next 72 hours. We believe these results demonstrate an on-target mechanistic response, which supports DM199's potential to be a first-in-class disease-modifying therapy for preeclampsia. Key findings from the interim analysis of Part 1a, specifically from Cohorts 6 through 9 in pregnant women with preeclampsia planned for delivery within 72 hours include the following: First, blood pressure data demonstrated clear dose-dependent and statistically significant sustained reductions in both systolic and diastolic blood pressure, underscoring DM199's potential to control maternal hypertension associated with preeclampsia. Second, DM199 significantly reduced the uterine artery pulsatility index, a Doppler-based measure of arterial resistance that suggests improved uteroplacental perfusion. Third and most importantly, DM199 did not cross the placental barrier, placing it in a unique position with respect to safety and reduced fetal risk in this highly vulnerable patient population. Through additional analysis, we have also demonstrated that DM199 does not pass to babies through breast milk, further reinforcing its confinement to the maternal circulation. This advantageous safety profile combined with DM199's novel mechanism of action may enable earlier initiation and longer treatment duration, which has the potential to drive meaningful prolongation of pregnancy without added safety burden. We believe the observed improvements in vascular resistance reflect restoration of normal endothelial function, consistent with an on-target mechanistic response to DM199 therapy. By improving endothelial health, DM199 has the potential to address the underlying vascular dysfunction driving the disease that should result in stabilization of maternal vascular pathology and prolonged pregnancy as opposed to current therapies that simply manage symptoms. Taken together, the ability to reduce blood pressure, improve uterine placental perfusion and restore endothelial function reinforces our belief in DM199's potential to be a first-in-class disease-modifying therapy for this life-threatening condition for which there are currently no approved treatment options. During the fourth quarter, under the leadership of Professor Cluver, enrollment continued in the Part 1a expansion cohort, which will include up to 12 additional patients to provide us with a more comprehensive data set. We anticipate completion of this cohort in the first half of 2026. Protocol amendments are being finalized for Part 1b and 2 of the study. Part 1b will enroll up to 30 hypertensive women with late-stage preeclampsia expected to deliver within 72 hours to further confirm the Part 1a results. These participants will receive continuous IV administration of DM199 that will be titrated to maintain blood pressure in the targeted range. Part 2 will enroll up to 30 women with early onset preeclampsia, who are candidates for expected management where the therapeutic goal is to prolong the pregnancy as long as possible while also providing increased blood flow to promote larger, healthier babies. These protocol amendments represent refinements to the previous treatment regimens based upon learnings from Part 1a. The fetal growth restriction cohort will be enrolling patients without preeclampsia, but with impaired placental function, further expanding the potential application of DM199 across placental vascular disorders. The first patient in that cohort is anticipated to be dosed in Q2 2026. Importantly, we have also recently received regulatory clearance from Health Canada to initiate a global Phase II clinical trial of DM199 in early onset preeclampsia. This is an important regulatory milestone for our PE program. We are currently finalizing plans to commence site activation in the second half of the year. We intend this trial to be a global Phase II study. It is an open-label dose-finding trial designed to enroll approximately 30 participants with early onset preeclampsia between 24 and 32 weeks of gestation. This expected management population represents patients with the greatest unmet medical need where safely prolonging pregnancy can have the most meaningful maternal and neonatal impact. The study will evaluate the safety, tolerability and preliminary efficacy of DM199 with dosing anticipated to continue until delivery. We are assessing 3 dose levels to inform dose selection of the optimal regimen for Phase III. Primary study endpoints include maternal pharmacokinetics and further confirmation that DM199 does not cross the placental barrier, an important safety consideration for both regulatory review and patient acceptance. In addition, we will evaluate clinical and biomarker outcomes, including prolongation of pregnancy, blood pressure control, uterine artery blood flow, circulating pathogenic biomarkers and renal function. We are also preparing to seek approval to expand the study to include sites in the U.K. And with respect to the additional reproductive tox study in rabbits requested by the FDA, preliminary results from a dose range finding study in rabbits suggests that rabbits may not be a suitable animal model for reproductive toxicology studies with DM199. This is likely due to an unusual immune response to the recombinant human protein unique to rabbits that has not been seen in rats, monkeys or humans thus far. Most importantly, from our perspective, there were no teratogenic effects observed in the approximately 200 pups or baby rabbits produced in a prior study. This included no external visceral or skeletal malformations. We are currently evaluating an alternative animal model to address the FDA's request, and we will work with FDA to find a solution in parallel to initiating the Phase II trial in Canada and other potential jurisdictions. Turning to our ReMEDy2 trial. 2025 was also a good year for our stroke program. Over the past several months, we have intensified our engagement with study sites to share best practices and build friendly competition. We've also added additional resources to support sites through the enrollment and follow-up process, and we continue to work on additional ways to support our study sites. These activities, along with increased site activations globally have resulted in encouraging enrollment momentum over the last few months. At present, I'm very pleased to report that with these additional efforts in the United States and Canada, along with expansion into the U.K. and Europe, we have achieved almost 70% of the required enrollment of 200 participants for the interim analysis. We currently have close to 61 active sites, including 4 in the U.K. and an additional 12 across Europe, and approximately 25 more sites are expected to activate in the coming quarter. With our recent progress, we are reiterating our guidance to complete the interim analysis by the second half of 2026. Since the last earnings call, an independent Data Safety Monitoring Board meeting was conducted after the enrollment of 100 patients. Following review of the safety data from these participants, the independent DSMB unanimously recommended that enrollment continue without modification. I will now turn the call back to Rick. Dietrich Pauls: Thanks, Julie. We're also pleased to note the paper titled Endothelial Triple Pathway Basal Relaxation as an adjuvant strategy in resistant hypertension was recently published in the Journal of Hypertension. The article authors included Dr. Luke Laffin, a recognized key opinion leader in the treatment of resistant hypertension. This publication underscores the need for new treatment approaches to lower blood pressure in patients with chronic kidney disease. It also highlights findings from our prior Phase II REDUX trial, which demonstrated DM199's ability to significantly reduce blood pressure in patients with elevated levels over a 3-month treatment period. DM199 was also observed to lower serum potassium levels in patients whose potassium levels were elevated, placing these patients at risk of developing hyperkalemia. We look forward to sharing more on the potential use of DM199 to control blood pressure in patients with chronic kidney disease in the future. I would like to now ask Scott to review the financial results for the quarter. Scott Kellen: Thank you, Rick, and good morning, everyone. We announced our full year financial results for 2025 and filed our annual report on Form 10-K yesterday. As of December 31, 2025, our cash, cash equivalents and short-term investments were $59.9 million. Current liabilities were $5.1 million and working capital of $55.5 million compared to cash and investments of $44.1 million, current liabilities of $5.4 million and working capital of $39.2 million as of December 31, 2024. The increase in cash and short-term investments is due to the net proceeds received from the sale of common shares in the company's July 2025 private placement and under its at-the-market offering program. We feel confident about our cash position and anticipate it will fund our planned clinical studies and corporate operations through the end of 2027. Net cash used in operating activities for the full year 2025 was $29.1 million compared to $22.1 million for the full year of 2024. This increase is primarily a result of the increase in net loss for the full year of 2025 as compared to the prior year period. Turning to the income statement. Our research and development expenses increased to $24.6 million for the year ended December 31, 2025, up from $19.1 million for the prior year. This $5.5 million increase is driven by a combination of factors, including the continuation of our ReMEDy2 clinical trial and its global expansion, the expansion of our clinical team in both the prior and current year periods and increased noncash share-based compensation costs. These increases were partially offset by cost reductions related to manufacturing process development work performed and completed in the prior year period. Our general and administrative expenses were $9.8 million for the full year 2025, up from $7.6 million for the full year 2024. G&A expenses increased by $2.2 million due to a number of factors, including increased noncash share-based compensation expense, increased personnel costs, increased investor relations expenses and increased patent prosecution costs. With that, let me ask the operator to open the lines for questions. Operator: [Operator Instructions] Your first question comes from Stacy Ku with TD Cowen. Stacy Ku: So we have a couple. If we could just stay with preeclampsia for now. The first question is on kind of your update with the rabbit preclinical trials for the U.S. IND approval. So just help us understand what are your early thoughts on the alternative species with the FDA? Are there -- what other preclinical models are best for reproductive tox studies? So that's the first question. If you could maybe further elaborate there. And then as we think about the ISP and clearly, a lot of great signals that we're going to get -- continue to get there, what key learnings are you hoping to carry into the early onset preeclampsia kind of cohort? As we think about Part 2 and Part 3 so fetal growth as well. Is there any potential that we can get an update later this year? So just help us understand where you all are in potential timing there? And then, of course, ahead of the U.S. trial, Julia, we kind of heard all the high level of preparation ahead of moving forward in the U.S., but just help us understand how our conversations progressing? What criteria is the team focused on when it comes to enrolling the right preeclampsia study investigators. And then if I could sneak in a tiny question on CKD. Clearly, a big opportunity. When could we expect a detailed plan or a more detailed plan for pursuing DM199 in treatment-resistant hypertension in CKD patients? Dietrich Pauls: So I'll start off maybe with the CKD, the fourth question is that we're very excited about the opportunity for our drug to lower blood pressure. We've clearly seen it in numerous trials. I think there's a huge clinical need, in particular in patients with chronic kidney disease as many of these patients have elevated levels of potassium that puts these patients at risk of hyperkalemia. So I think first, we can treat these patients, control their blood pressure when they frankly don't have a lot of options and what we did see in our previous trial, the ability to lower potassium levels, which could be a very exciting opportunity. Right now, really the focus though is on our preeclampsia and stroke program. And at the appropriate time, we'll look at potentially advancing into CKD. But right now, we want to make sure we're really focused here near term on our other 2 programs. And then maybe I'll hand it off to Julie. Julie Krop: Yes. Stacy, all very good questions. I think it's premature right now to tell -- to say exactly which species that we're going to focus on. We want to first be able to -- we submitted a package to the FDA, and we're having a discussion with them further on appropriate models. There are several appropriate models we're considering. But again, we'll hold back until we will give an update once we have that discussion. And then with regards to your question around what have we learned from previous cohorts, I think I think we understand the PK better after running the initial studies. And one -- one of the learnings we're taking forward is for our early onset studies using the subcutaneous only and probably reserving the IV for the later onset as we've been doing previously. So that was one element. I think as far as site selection, we are highly focused on selecting sites that have both experience with preeclampsia studies as well as a practice that's well suited for early onset expectant management, which is something -- some sites are very adept at and other sites are more conservative about when to deliver patients. So again, it's that tight rope between treating -- between the mother's health and the baby's health and making sure that we select centers that are comfortable keeping the mother even though there's some severe -- there's potentially severe complications going on, it feels like they can stabilize them enough to prolong the pregnancy. So those are kind of the considerations that we're focused on. Operator: Your next question comes from Josh Schimmer with Cantor. Joshua Schimmer: Two quick ones. For the evaluation of DM199 in earlier onset preeclampsia, how do you think about the potential risk of the protein crossing the placental barrier at that stage? And what evidence do you have to suggest that it in that setting as well will not cross in any meaningful extent to the placenta? And then for the interim analysis for the Phase II/III stroke program, what are the potential outcomes there? Are there stopping criteria either positive or negative or resizing criteria? Maybe you can share a little bit more about what you expect the interim to inform? Dietrich Pauls: Sure. Thanks, Josh. So starting off with the early onset and crossing of the placenta. We don't think it will happen. I mean we've done now over 35-plus patients with more late onset preeclampsia where we didn't see this crossing. To cross the placental barrier is about -- the size to cross will be about 500 daltons, where our protein is about 26 kilodaltos, so 50x larger. So it would be very shocking if it did occur. We also did an earlier study in the rat model, we also did not see it. So it's just -- I think we're at this point here, another check the box, but we feel very good the fact that in the South African patient population, we didn't see it. With regards to your second question, the ongoing Phase II/III stroke program, for the interim analysis, first off, if we're not seeing a drug effect, we will terminate the study for lack of efficacy. Otherwise, there'll be a resample size and the sample size will range from 300 to 728. How we designed this trial, and we believe a base case that if we're seeing a drug effect that's comparable to our Phase II, which is comparable to the many studies that have been shown with the human urinary form of the study in China. Looking at the modified ranking score of 0 to 1 as the primary endpoint, we're anticipating that if we see, again, a drug effect comparable, we'll be looking at something ideally in the 300 to 350 range. If we need to go above 500 patients, we'll have to really evaluate the next steps for the program in light of the high prospects we think as well for the preeclampsia program. Operator: Your next question comes from Thomas Flaten with Lake Street. Thomas Flaten: Just a question on the Part 1a expansion cohort. It strikes me that it's taking a bit longer than I might have thought in my mind given how many patients Dr. Cluver sees on a weekly basis. Is this a slow and deliberate approach she's taking? Or has something else been going on there? Just some additional color on that expansion cohort would be great? Dietrich Pauls: Sure. Yes, it's a good question. It really has been a result of some staffing challenges that Cathy Cluver has had at her site. We've recently provided some additional financial support. And with the hiring of a couple of new nurses just in the last few weeks, we anticipate that enrollment is going to pick up again. Thomas Flaten: And then following on from that, if I understood the press release and your commentary correctly, are Parts 2 and 3 -- are Parts 1b and 2, sorry, dependent on the completion of the expansion cohort? Or will they initiate prior to the full completion of that cohort? Dietrich Pauls: Those -- so we've made a few protocol amendments that are going through shortly. And so we're anticipating later in Q2 that those 2 cohorts should initiate. Part 1a expansion study is ongoing and will be completed as well in Q2. Thomas Flaten: Got it. Understood. And then just a quick one on ReMEDy2. You mentioned some acceleration or some momentum building. I was wondering if you could just give us a sense of in the first quarter of this year, how many patients did you enroll compared to what you did in the fourth quarter of last year, just to give us some kind of scope and scale of that momentum? Dietrich Pauls: Yes. I would just say at a high level, the enrollment increase really has been more so it's been this year. So even going into the end of 2025, it was still relatively slow, but it really has picked up substantially in the last month, last 2 months. But really, the more recent months is where we've seen the really uptick. And that also correlates to where we've had the increase in sites and all the work that Julia and her team have been doing has been wonderful. And I think we're now starting to see the benefits of all that work. Operator: Your next question comes from Matthew Caufield with H.C. Wainwright. Matthew Caufield: For the ReMEDy2 trial, there had been some prior discussion of some challenges with stroke enrollment formally being slower in the U.S. due to initial triage in the community hospitals. Kind of thinking bigger picture, do you ultimately foresee any limitations for real-world access if or when DM199 could ultimately be approved for the AIS indication? Dietrich Pauls: Yes. Good question. So I think there's a difference between the challenges that we had been seeing with enrolling at more of these hub-and-spoke hospitals. But ultimately, for commercialization, the wonderful thing about our drug is the safety profile should be great in being able to be used very broadly at small community hospitals and big academic centers. So I think that the previous challenge we're having is really more with enrolling patients at the large academic centers. But in terms of -- again, at the commercial side, I think it will be a wonderful drug because of that safety profile. Operator: Your next question comes from Chase Knickerbocker with Craig-Hallum. Chase Knickerbocker: I was just hoping to work one more in on the nonclinical side here. Can you just maybe walk us through kind of the differences in your prior nonclinical rabbit study that you had kind of mentioned where you didn't see any toxicity in this one? Was there kind of a different species used here? Or maybe just kind of your biological rationale as to why this antibody response arose? Dietrich Pauls: Yes, Julie, can you take that one? Julie Krop: Yes. So that's a very good question. The first study was a different gestational age time period for the pre- and postnatal rabbit study. We studied an earlier -- I mean, a slightly later gestational age as well as a slightly different duration of treatment, different doses. So it's hard to explain. We did see maternal toxicity in that study as well. It wasn't quite as significant. But I think the difference here and the issue really with the FDA is not related to concern on the part of the fetus -- I mean, sorry, the pups, if you will. The pups really did not show any increase in malformations or teratogenicity from the control group in either study. But I think the concern with the FDA is finding a NOAEL effect dose where they don't see any adverse effects and the maternal toxicity that we saw, which we believe is due to immunogenicity, which is not uncommon to see in rabbits and immune responses very quickly to human proteins. So I think really, it was in both studies, we weren't -- we had maternal toxicity. So I don't think they were really that different other than gestational ages being different and the FDA wanting us to dose primarily after the first trimester after the development -- the early development of the fetus because that's closer to the way we're going to dose humans. So it just turns out, I think the rabbits just are not a good species, and we're going to just have to do it in a different species. Chase Knickerbocker: Got it. And then just maybe a little bit on time lines as far as when you'd expect to get that feedback that you need to continue with the different species or just kind of color from FDA on what they would like to move forward. Do you have a meeting scheduled in Q2? Maybe just walk us through time lines there. Julie Krop: So we are going to -- we'll provide an update as soon as we have something to update. I don't think we're giving a forecast yet until we understand and get alignment from the FDA on the path forward. Chase Knickerbocker: Understood. And then just last for me, Rick, on the stroke timing, could you just give us a little bit more color as to kind of what you're seeing from an enrollment rate perspective? I mean, is it kind of being driven by kind of breadth increasing? Or is that depth really kind of increasing as we thought it would to kind of drive this acceleration in enrollment in the stroke study? Dietrich Pauls: Yes. And it's a combination of, in particular, over the last few months, an increase in the enrollment rate per site and also for a greater number of sites. And then with being at 61 sites now and having sites having a chance to be in the trial and understand some of the challenges and opportunities of running the trial. And then I think also having a number of sites that are also on the verge of coming on board here in the coming weeks, we feel good about reiterating our guidance for this year. Operator: That concludes our question-and-answer session. I would like to now turn the conference back over to Rick Pauls, DiaMedica's President and Chief Executive Officer, for closing remarks. Dietrich Pauls: Well, thank you all for joining us today. We greatly appreciate your interest in DiaMedica and hope you enjoy the rest of the day. This concludes our call. Thank you. Operator: This concludes today's call. Thank you so much for attending. You may now disconnect, and have a wonderful rest of your day.